Time Warner Cable 2014 Annual Report Download - page 99

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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
obligation at fair value in other current liabilities in the consolidated balance sheet. The fair value of the equity award
reimbursement obligation to Time Warner was estimated using the Black-Scholes model. The change in the equity award
reimbursement obligation fluctuated primarily with the fair value and expected volatility of Time Warner common stock
and changes in fair value were recorded in other income, net, in the period 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. As of March 12, 2014, the Company no longer viewed this obligation as a derivative
financial instrument valued using Level 3 fair value measurements as the $6 million remaining liability was fixed.
Changes in the fair value of the equity award reimbursement obligation, valued using significant unobservable inputs
(Level 3), from January 1 through December 31 are presented below (in millions):
2014 2013 2012
Balance at beginning of year .............................................. $ 11 $ 19 $ 22
(Gains) losses recognized in other income, net ................................ (1) 10 9
Payments to Time Warner for awards exercised ............................... (4) (18) (12)
Transfer out of Level 3 (and subsequently paid) ............................... (6) — —
Balance at end of year ................................................... $ — $ 11 $ 19
Assets Measured at Fair Value on a Nonrecurring Basis
The Company’s assets measured at fair value on a nonrecurring basis include equity-method investments, long-lived
assets, indefinite-lived intangible assets and goodwill. The Company reviews the carrying amounts of such assets
whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least
annually as of July 1 for indefinite-lived intangible assets and goodwill. Any resulting asset impairment would require that
the asset be reduced to its fair value. Refer to Note 8 for further details regarding the results of the Company’s fair value
analysis of cable franchise rights and goodwill.
Fair Value of Other Financial Instruments
The Company’s other financial instruments not measured at fair value on a recurring basis include (a) cash and
equivalents, receivables, accounts payable, accrued liabilities and borrowings under the Company’s commercial paper
program, which are reflected at cost in the consolidated balance sheet, and (b) the TWC Notes and Debentures and the
TWCE Debentures (collectively, the “senior notes and debentures”) not subject to fair value hedge accounting, which are
reflected at amortized cost in the consolidated balance sheet. With the exception of the senior notes and debentures, cost
approximates fair value for these instruments due to their short-term nature. The carrying value and related estimated fair
value of the senior notes and debentures was $23.126 billion and $27.842 billion, respectively, as of December 31, 2014
and $25.003 billion and $25.187 billion, respectively, as of December 31, 2013. Estimated fair values for the senior notes
and debentures are determined by reference to the market value of the instrument as quoted on a national securities
exchange or in an over-the-counter market (a Level 1 fair value measurement).
12. TWC SHAREHOLDERS’ EQUITY
Shares Authorized and Outstanding
As of December 31, 2014, TWC is authorized to issue up to approximately 8.333 billion shares of TWC common
stock, par value $0.01 per share, of which 280.8 million and 277.9 million shares were issued and outstanding as of
December 31, 2014 and 2013, respectively. TWC is also authorized to issue up to approximately 1.0 billion shares of
preferred stock, par value $0.01 per share. As of December 31, 2014 and 2013, no preferred shares have been issued, nor
does the Company have current plans to issue preferred shares.
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