SPECTRUM MANAGEMENT HOLDING COMPANY, LLC - FORM 10-K

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

Commission file number 001-33335

TIME WARNER CABLE INC.

(Exact name of registrant as specified in its charter)

Delaware

84-1496755

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

60 Columbus 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 value $0.01		New York Stock Exchange
5.750% Notes due 2031		New York Stock Exchange
5.250% Notes due 2042		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

As of the close of business on February 11, 2015, there were 280,900,337 shares of the registrant’s Common Stock outstanding. The aggregate market value of the registrant’s voting and non-voting common equity securities held by non-affiliates of the registrant (based upon the closing price of such shares on the New York Stock Exchange on June 30, 2014) was approximately $41.1 billion.

DOCUMENTS INCORPORATED BY REFERENCE


Description of document		Part of the Form 10-K
Portions of the definitive Proxy Statement to be used in connection with the registrant’s 2015 Annual Meeting of Stockholders		Part III (Item 10 through Item 14) (Portions of Items 10 and 12 are not incorporated by reference and are provided herein)

PART I

Item 1. Business.

Overview

Time Warner Cable Inc. (together with its subsidiaries, “TWC” or the “Company”) is among the largest 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 (including Los Angeles) and Texas. TWC’s mission is to connect its customers to the world – simply, reliably and with superior service. As of December 31, 2014, the Company served approximately 15.2 million residential and business services customers who subscribed to one or more of its video, high-speed data and voice services. TWC’s residential services also 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 a variety of local, regional and national customers.

Comcast Merger

On February 12, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Comcast Corporation (“Comcast”) whereby the Company agreed to merge with and into a 100% owned subsidiary of Comcast (the “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 October 9, 2014, respectively, Comcast’s shareholders approved the issuance of Comcast Class A common stock to TWC stockholders in the Comcast merger and TWC stockholders approved the adoption of the Merger Agreement. TWC and Comcast expect to complete the Comcast merger in early 2015, subject to receipt of regulatory approvals, as well as satisfaction of certain other closing conditions.

On April 25, 2014, Comcast entered into a binding agreement with Charter Communications, Inc. (“Charter”), which contemplates three transactions (the “divestiture transactions”): (1) a contribution, spin-off and merger transaction, (2) an asset exchange and (3) a sale of assets. The completion of the divestiture transactions will result in the combined company divesting a net total of approximately 3.9 million video subscribers, a portion of which are TWC subscribers (primarily in the Midwest). The divestiture transactions are expected to occur contemporaneously with one another and are conditioned upon and will occur following the closing of the Comcast merger. They are also subject to a number of other conditions. The Comcast merger is not conditioned upon the closing of the divestiture transactions and, accordingly, the Comcast merger can be completed regardless of whether the divestiture transactions are ultimately completed.

Caution Concerning Forward-Looking Statements and Risk Factors

This Annual Report on Form 10-K includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and beliefs about future events and are inherently subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein due to changes in economic, business, competitive, technological, strategic and/or regulatory factors and other factors affecting the operation of TWC’s business, including the proposed Comcast merger. For more detailed information about these factors, and risk factors with respect to the Company’s operations, see Item 1A, “Risk Factors,” below and “Caution Concerning Forward-Looking Statements” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the financial section of this report. TWC is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of changes in circumstances, new information, subsequent events or otherwise.

Available Information and Website

Although TWC and its predecessors have been in the cable business for over 40 years in various legal forms, Time Warner Cable Inc. was incorporated as a Delaware corporation on March 21, 2003. TWC’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports filed with or furnished to the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on the Company’s website at www.twc.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC (www.sec.gov). The Company is providing the address to its website solely for the information of investors. The Company does not intend 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

Video Services

Programming. TWC’s video service provides over 300 channels (including, on average, over 200 high-definition (“HD”) channels) and nearly 20,000 video-on-demand (“VOD”) choices, which, increasingly, consumers can watch on the device of their choosing, both inside and outside the home. TWC offers various tiers and packages of video programming and music services, some of which are tailored to appeal to specific groups of customers. For example, TWC offers specialty tiers of genre-based programming, such as Movie Pass and TWC Sports Pass, and ethnic programming, such as El Paquetazo for subscribers interested in Hispanic-oriented content. TWC’s residential video subscribers also may subscribe to premium network programming, such as Cinemax, EPIX, HBO, Showtime and Starz and related offerings, on an à la carte basis and in packages.

TWC’s residential video subscribers pay a monthly fee based on the video programming tier or package they receive. Subscribers to specialized tiers and premium networks are charged an additional monthly fee. Discounts are generally available for the purchase of multiple tiers, packages or services.

During 2014, TWC continued rolling out its first generation cloud-based guide featuring an advanced VOD portal and, in the fourth quarter of 2014, began rolling out its next-generation cloud-based guide.

Time-shifting. TWC provides a broad range of advanced services, such as VOD, digital video recorders (“DVRs”) and Start Over services that give residential video subscribers control over when they watch their favorite programming.

TWC’s VOD service provides residential video subscribers with access to a wide selection of movies, programming from broadcast and cable networks, premium movie services, music videos, local programming and other content as a complement to the programming packages and channels to which they subscribe. TWC’s VOD service also offers a wide selection of featured movies and special events on a transactional or pay-per-view basis.

TWC offers equipment with DVR functionality that enables residential video subscribers to pause and/or rewind “live” television programs and record programs for future viewing. Subscribers pay an additional monthly fee for TWC’s DVR service. TWC also offers whole home DVR, a multi-room DVR service that allows a program recorded on a DVR to be watched through other compatible set-top boxes in a customer’s home. In addition, customers may program and manage their DVRs remotely via a smartphone, tablet or computer. During 2014, TWC began deploying next-generation

whole home DVRs, or “Enhanced DVRs,” which allow customers to watch and record six shows simultaneously and record up to 150 hours of HD programming. TWC also offers Start Over, which enables digital video subscribers using a TWC-provided set-top box to restart select “in progress” programs directly from the relevant channel.

New ways to watch. TWC, through its TWC TV apps, enables in-home viewing of up to 300 channels of live programming and over 7,000 hours of VOD programming on a variety of devices, including Apple iOS and Android tablets and smart phones, Amazon Kindle Fire tablets, Roku streaming players, Samsung Smart TVs, Xbox 360 video game consoles and Fan TV streaming players, as well as on PC and Mac computers via www.twctv.com. In addition, subscribers are able to use their device or computer to, among other things, access the interactive program guide, browse and start VOD programs and change television channels on compatible TWC set-top boxes.

Through the same TWC TV apps, residential video subscribers are able to watch up to 41 live channels and 2,000 hours of VOD content from 48 networks on a “TV Everywhere” basis outside the home. During 2015, TWC expects to continue to add programming to its TWC TV apps and increase the number of platforms on which it is available. In addition, TWC provides its video subscribers with access to over 80 network owned and managed TV Everywhere sites and apps, such as HBO GO and WatchESPN, through a growing number of supported devices at no additional charge.

As of December 31, 2014, TWC served approximately 10.8 million residential video subscribers.

High-speed Data Services

TWC offers a variety of high-speed data service tiers, each with attributes tailored to meet the different needs of TWC’s subscribers. These tiers provide a range of speed (from up to 2 to up to 300 megabits per second (“Mbps”) downstream), price and consumption (unlimited, 30 gigabyte (“GB”) and 5 GB) levels. TWC’s high-speed data service also provides communication tools and personalized services, including email, PC security, parental controls and online radio, at no additional charge.

Most of TWC’s high-speed data customers have access to a nationwide network of more than 300,000 WiFi hotspots, referred to as “Cable WiFi,” for no additional charge. Cable WiFi is provided under agreements TWC has with a group of other U.S. cable companies to offer each other’s high-speed data subscribers access to their respective WiFi networks. As of December 31, 2014, TWC had deployed nearly 70,000 TWC WiFi Hotspots. TWC’s Basic and “Everyday Low Price” tier subscribers may access the TWC WiFi Hotspots and Cable WiFi for a fee. During 2015, TWC intends to continue to increase the number of WiFi hotspots available to its high-speed data subscribers.

As of December 31, 2014, TWC served approximately 11.7 million residential high-speed data subscribers.

Voice Services

TWC’s residential voice service offers customers unlimited calling throughout North America, China and Hong Kong, together with a variety of calling features, including call waiting, call forwarding, distinctive ring and caller ID, generally for a fixed monthly fee. TWC also offers a number of plan options that are designed to meet customers’ particular needs, including local-only, unlimited in-state and international calling plans, such as the Global Penny Phone Plan, which enables customers to call over 50 countries for only a penny per minute, and the International OnePrice Plan, which provides customers with 1,000 minutes per month to call over 100 countries. In 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 messages on a mobile device using their home number and calling plan as well as view and manage voicemail from their home phone. TWC also provides a free web portal, VoiceZone, which allows voice subscribers to customize their service features, set up caller ID on PC and block unwanted calls. Customers with TWC’s voicemail service may also use VoiceZone to listen to, download and email their messages at no additional charge.

As of December 31, 2014, TWC served approximately 5.3 million residential voice subscribers.

IntelligentHome

TWC offers IntelligentHome, a state-of-the-art security and home management service, in substantially all of its operating areas. TWC’s broadband cable system connects the customer’s in-home system to TWC’s technologically-advanced emergency response center with cellular backup support. In addition to providing traditional security and fire monitoring, the service allows customers to remotely arm or disarm their security system, monitor their home via indoor and outdoor cameras and remotely operate key home functions, including setting and controlling lights, thermostats and door locks. To obtain IntelligentHome service, customers must subscribe to TWC’s high-speed data service.

As of December 31, 2014, TWC served 85,000 IntelligentHome customers.

Business Services

TWC offers a wide and growing variety of products and services to business customers, including high-speed data, networking, voice, video, hosting and cloud computing services. TWC offers these services at retail and wholesale using its own network infrastructure and third-party infrastructure as required to meet customer needs. TWC’s retail customers range from small businesses with a single location to medium-sized and enterprise businesses with multiple locations as well as government, education and non-profit institutions. TWC’s wholesale customers are primarily other service providers, such as telecommunications carriers and network and managed services resellers. As of December 31, 2014, TWC served 687,000 business customers.

Data Services

TWC offers business customers a variety of data services, including Internet access, network services and wholesale transport services.

Internet access. TWC offers a variety of high-speed data service tiers, each with attributes tailored to meet the different needs of its customers. TWC offers asymmetrical Internet access with downstream speeds up to 300 Mbps. TWC also provides dedicated Internet access to businesses over its fiber network, offering symmetrical speeds up to 10 gigabits per second (“Gbps”).

Network services. TWC offers Ethernet-based network services that enable businesses to interconnect their geographically dispersed locations and local area networks (“LANs”) in a private network, with speeds up to 10 Gbps. In addition, TWC offers 10 Gbps, point-to-point optical wave service on a limited basis.

Wholesale transport services. TWC offers wholesale transport services to wireless telephone providers for cell tower backhaul and to other service providers 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 businesses of different sizes and across key industries, such as hospitality, healthcare and education.

As of December 31, 2014, TWC served 203,000 business video subscribers.

Voice Services

TWC offers business customers voice services that include both multi-line phone service and trunk service.

Multi-line phone. TWC’s multi-line business voice service, Business Class Phone, offers business customers a range of calling plan options along with key business features, such as call hunting, extensive call forwarding options, call

restrictions and call transfer. TWC also provides a web-based customer portal, VoiceManager, which allows voice customers to customize and manage the associated service features.

Trunks. TWC’s trunk service is offered either through a Primary Rate Interface (“PRI”) or a Session Initiation Protocol (“SIP”) handoff to the customer. TWC’s PRI trunk service, Business Class PRI, offers medium-sized and enterprise business customers a range of trunk packages with up to 23 simultaneous voice calls on each trunk and a set of voice usage plans. TWC’s SIP trunk service, Business Class SIP, offers medium-sized and enterprise business customers a range of trunk packages with up to 200 simultaneous voice calls with a set of voice usage plans. TWC also provides the VoiceManager customer portal to enable each trunk service customer to customize and manage the associated service features.

As of December 31, 2014, TWC served 323,000 business voice subscribers.

Managed and Outsourced IT Solutions and Cloud Services

TWC offers its data customers a number of managed and cloud services, including managed network security, domain name registration, online backup, hosted Microsoft Exchange and SharePoint and web hosting. Furthermore, through its NaviSite subsidiary, TWC provides a range of cloud solutions, including Infrastructure as a Service (“IaaS”) and Desktop as a Service (“DaaS”), and customized managed hosting, 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 Media (“TWC Media”), the advertising sales arm of TWC, and the Company’s regional sports networks, its local sports, news and lifestyle channels and SportsNet LA. It also includes other operating revenue and costs, including those derived from the Advance/Newhouse Partnership and home shopping network-related services. For more information about the Advance/Newhouse Partnership, see “—TWE-A/N Partnership” below.

TWC Media

TWC Media sells video and online advertising inventory to local, regional and national advertising customers. Under its cable network programming agreements, TWC is typically entitled to two or three minutes of advertising time per hour that it can sell to third parties or retain for its own use. TWC also sells the advertising inventory of its owned and operated local sports, news and lifestyle channels and its Time Warner Cable Central, or TWCC.com, portal, and advertising inventory on the Company’s regional sports networks that carry Los Angeles Lakers’ basketball games and other sports programming (Time Warner Cable SportsNet and Time Warner Cable Deportes and, collectively, the “Lakers’ RSNs”) and on SportsNet LA, a regional sports network launched by American Media Productions, LLC (“American Media Productions”), that carries Los Angeles Dodgers’ baseball games and other sports programing.

In many locations, TWC has formed advertising “interconnects” or entered into representation agreements with contiguous cable system operators under which TWC sells advertising on behalf of those operators. This enables TWC to deliver commercials across wider geographic areas, replicating the reach of the local broadcast stations as much as possible. TWC also sells advertising inventory on behalf of other video distributors, including, among others, Verizon Communications Inc.’s (“Verizon”) FiOS, AT&T Inc.’s (“AT&T”) U-verse and Charter, in a number of cities and online display advertising on behalf of several third parties. In addition, TWC, together with Comcast and Cox Communications, Inc. (“Cox”), owns National Cable Communications LLC (“National Cable Communications”), which, on behalf of a number of cable operators, sells advertising time to national and regional advertisers. Through National Cable Communications, TWC is a party to an agreement to sell certain DIRECTV Group Inc. (“DIRECTV”) and DISH Network, LLC (“DISH Network”) advertising inventory.

Regional Sports Networks and Local Sports, News and Lifestyle Channels

In October 2012, TWC launched the Lakers’ RSNs that carry the Los Angeles Lakers’ basketball games as well as other regional sports programming. TWC has a long-term agreement with the Los Angeles Lakers for rights to distribute all locally available pre-season, regular season and post-season Los Angeles Lakers’ games. As of December 31, 2014, the Lakers’ RSNs were distributed by the majority of major video distributors to approximately 5.1 million subscribers. TWC also manages 31 local news channels, including Time Warner Cable News NY1, a 24-hour news channel focused on New York City, 16 local sports channels and four local lifestyle channels, and it owns 26.8% of Sterling Entertainment Enterprises, LLC (doing business as SportsNet New York), a New York City-based regional sports network that carries New York Mets’ baseball games as well as other regional sports programming.

In February 2014, American Media Productions, an unaffiliated third party, launched SportsNet LA, a regional sports network carrying the Los Angeles Dodgers’ baseball games and other sports programming. In accordance with long-term agreements with American Media Productions, TWC acts as the network’s exclusive advertising and affiliate sales agent and has certain branding and programming rights with respect to the network. In addition, TWC provides certain production and technical services to American Media Productions. The Company continues to seek distribution agreements for the carriage of SportsNet LA by major distributors.

Distribution of Services

TWC delivers video, data and voice services over a network that includes a nationwide fiber backbone, fiber-rich regional and metro rings, and “last mile” connections to customers’ homes and businesses. The national backbone delivers nationally centralized content and services to regional origination points or “headends.” The regional and metro rings provide connectivity among the headends within a specific geographic area. TWC transmits signals via fiber optic cable from these headends to a group of distribution “nodes” and uses coaxial cable to deliver the signals from the individual nodes to the homes and businesses they serve (an architecture known as “hybrid fiber coaxial cable” or “HFC”). TWC also continues to increase the number of businesses directly connected by fiber to its network.

During 2014, TWC invested in its network and 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 in the process of going “all digital” in Austin. The conversion to “all digital” allows TWC to reclaim spectrum currently dedicated to the delivery of analog video signals, thereby freeing additional capacity for faster high-speed data service as well as other services. During 2014, TWC also continued to deploy new and improved set-top boxes, digital-to-analog converters and advanced modems in customers’ homes throughout its operating areas and to increase the availability of WiFi to its high-speed data subscribers.

TWC also introduced rigorous new performance standards for its operating plant in order to improve the reliability and performance of its services. As part of the initiative, the Company monitors and assesses plant health under a proprietary scoring system, allowing it to promptly identify and remediate sub-par performance.

Sources of Supply

TWC contracts with third parties for goods and services related to the delivery of its video, high-speed data and voice services.

Video programming. TWC carries local broadcast stations generally pursuant to the compulsory copyright provisions of the Copyright Act of 1976, as amended, as well as under either the Federal Communications Commission (the “FCC”) “must carry” rules or a written retransmission consent agreement with the relevant station owner. TWC has multi-year retransmission consent agreements in place with most of the television stations that it carries that have elected

retransmission consent during the most-recent election cycle. For more information, see “—Regulatory Matters” below. Cable networks, including premium networks and related VOD content, are carried pursuant to affiliation agreements. TWC seeks to include in its agreements the rights to offer programming to its subscribers through multiple delivery platforms. TWC generally pays a monthly per subscriber fee for these cable services and for broadcast stations that elect retransmission consent. Payments to the providers of some premium networks may be based on a percentage of TWC’s gross receipts from subscriptions to the services. Generally, TWC obtains rights to carry VOD movies and events and to sell and/or rent online video programming via the TWCC.com Video Store through iN Demand L.L.C., a company in which TWC holds a minority interest. For more information, see “Risk Factors—Increases in programming and retransmission costs or the inability to obtain popular programming could adversely affect TWC’s operations and financial results.”

In addition, TWC has entered into long-term agreements to carry Los Angeles Lakers’ basketball games and other sports programming on its Lakers’ RSNs and to act as the exclusive advertising and affiliate sales agent for SportsNet LA. For more information about these agreements, see “—Services—Other Operations—Regional Sports Networks and Local Sports, News and Lifestyle Channels” above and “Risk Factors—TWC’s business may be adversely affected if it fails to reach distribution agreements providing for carriage of the Lakers’ RSNs and SportsNet LA or if such agreements are on unfavorable terms.”

Set-top boxes and network equipment. TWC purchases set-top boxes and conditional-access security cards (“CableCARDs”) from a limited number of suppliers and rents these devices to subscribers at monthly rates. See “—Regulatory Matters—Video Services—Subscriber rates” below. TWC also purchases routers, switches and other network equipment from a limited number of providers. See “Risk Factors—TWC may not be able to obtain necessary hardware, software and operational support.”

High-speed data and voice connectivity. TWC delivers its high-speed data and voice services through its HFC network. TWC uses circuits that it either owns or leases from third parties to connect to the Internet, the public switched telephone network and to interconnect to its network. TWC pays fees for leased circuits based on the amount of capacity available to it and pays for Internet connectivity based on the amount of IP-based traffic received from and sent over the other carrier’s network. TWC also has entered into a number of “settlement-free peering” arrangements with third-party networks that allow TWC to exchange traffic with those networks without a fee.

Competition

Residential Services

TWC faces intense competition for residential services customers, both from existing competitors and, as a result of the rapid development of new technologies, services and products, from new entrants.

Principal 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, among others, AT&T, CenturyLink, Inc., Cincinnati Bell, Inc., Fairpoint Communications, Inc., Frontier Communications Corporation, Hawaiian Telcom Holdco, Inc., Verizon and Windstream Corp.

Direct broadcast satellite. TWC’s residential video service faces competition from direct broadcast satellite (“DBS”) services, primarily DISH Network and DIRECTV, which have a national footprint and compete in all of TWC’s operating areas. DISH Network and DIRECTV offer satellite-delivered pre-packaged programming services that can be received by relatively small and inexpensive receiving dishes. These providers offer aggressive promotional pricing, exclusive programming (e.g., NFL Sunday Ticket) and video services that are comparable in many respects to TWC’s residential video service, including its DVR service and some of its interactive programming features.

In some areas, incumbent local telephone companies and DBS operators have entered into co-marketing arrangements that allow the telephone companies to offer synthetic bundles (i.e., video service provided principally by the DBS operator, and DSL, wireline phone service and, in some cases, wireless service provided by the telephone company). From a consumer standpoint, the synthetic bundles appear similar to TWC’s bundles. DISH Network also directly offers satellite-delivered broadband service under the name dishNET. In May 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 services compete with Google Inc.’s (“Google”) video and broadband services, and Google has announced its intention to launch video and broadband service in other TWC operating areas during 2015. In addition to Google, others, including RCN Telecom Services, LLC and WideOpenWest Finance, LLC (“WOW”), have overbuilt in parts of the Company’s operating areas.

Other Competition and Competitive Factors

Aside from competing with the video, high-speed data and voice services offered by incumbent local telephone companies, DBS providers and overbuilders, each of TWC’s residential services also faces competition from other companies that provide services on a stand-alone basis.

Video competition. TWC’s residential video service faces competition from a number of different sources, including companies that deliver movies, television shows and other video programming over broadband Internet connections to TVs, computers, tablets and mobile devices, such as Hulu.com, Apple Inc.’s “iTunes,” Amazon.com Inc.’s “Prime,” Netflix Inc.’s “Watch Instantly,” Google’s “YouTube,” DIRECTV’s “Yaveo” and DISH Network’s “Sling TV.” Increasingly, content owners are utilizing Internet-based delivery of content directly to consumers, some without charging a fee for access to the content.

Internet competition. TWC’s residential high-speed data service faces competition from a variety of companies that offer other forms of online services, including wireless and satellite-based broadband services.

Voice competition. TWC’s residential voice service competes with wireline, wireless and “over-the-top” phone providers. An increasing number of homes in the U.S. are replacing their traditional wireline telephone service with wireless phone service, a trend commonly referred to as “wireless substitution.” Wireless phone providers are encouraging this trend with aggressive marketing and the launch of wireless products targeted for home use. TWC also competes with “over-the-top” providers, such as Vonage, Skype, magicJack, Google Voice and Ooma, Inc. and companies that sell phone cards at a cost per minute for both national and international service. In addition, TWC’s residential voice service competes with other forms of communication, such as text messaging on cellular phones, instant messaging, social networking services, video conferencing and email. The increase in wireless substitution, the number of different technologies capable of carrying voice services and the number of alternative communication options available to customers have intensified the competitive environment in which TWC operates its residential voice service.

Security and home management competition. TWC’s IntelligentHome service faces competition from traditional security companies, such as The ADT Corporation, service providers such as Verizon, AT&T and DIRECTV, as well as new entrants, such as Alarm.com, Inc. and NEST Labs, Inc. (which Google acquired in 2014).

Additional competition. In addition to multi-channel video providers, cable systems compete with all other sources of news, information and entertainment, including over-the-air television broadcast reception, live events, movie theaters and the Internet. To the extent that TWC’s services converge with theirs, TWC competes with the manufacturers of consumer electronics products. For instance, TWC’s DVR service competes with similar services on devices manufactured by consumer electronics companies.

Business Services

TWC faces significant competition as to each of its business services offerings. Its business high-speed data, networking and voice services face competition from a variety of telecommunications carriers, including incumbent local telephone companies. TWC’s cell tower backhaul service also faces competition from traditional telephone companies as well as other telecommunications carriers, such as metro and regional fiber-based carriers. TWC’s business video service faces competition from DBS providers. TWC also competes with cloud, hosting and related service providers and application-service providers.

Advertising

In advertising, TWC faces intense competition for advertising revenue across many different platforms and from a wide range of local and national competitors. Competition has increased and will likely continue 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

As of December 31, 2014, TWC had approximately 54,800 employees, including approximately 370 part-time employees, and approximately 4.4% of TWC’s employees were represented by labor unions. TWC considers its relations with its employees to be good.

Regulatory Matters

TWC’s business is subject, in part, to the Communications Act of 1934, as amended (the “Communications Act”), regulation by the FCC, and other regulation by federal, state, local and foreign authorities under applicable laws and regulations. Various legislative and regulatory proposals under consideration from time to time by the U.S. Congress (“Congress”) and various federal, state and local authorities have in the past materially affected TWC and may do so in the future. TWC is unable to predict whether any such proposals will be adopted and the extent to which such proposals may affect its business.

The following is a summary of current significant federal, state and local laws and regulations affecting the operation of TWC’s business as well as potential material legal and regulatory requirements that could affect its business.

Video Services

Carriage of broadcast television stations and other programming regulation. The Communications Act and the FCC’s regulations contain broadcast signal carriage requirements that allow local commercial television broadcast stations to elect once every three years to require a cable system to carry their stations, subject to some exceptions, commonly called “must carry,” or to negotiate with cable systems the terms on which the cable systems may carry their stations, commonly called “retransmission consent.”

The Communications Act and the FCC’s regulations require a cable operator to devote, without compensation, up to one-third of its activated channel capacity for the mandatory carriage of local commercial television stations that elect “must carry.” The Communications Act and the FCC’s regulations give local non-commercial television stations mandatory carriage rights, but non-commercial stations do not have the option to negotiate retransmission consent for the carriage of their signals by cable systems. Additionally, cable systems must obtain retransmission consent for all “distant” commercial television stations (i.e., those television stations outside the designated market area to which a community is assigned) except for commercial satellite-delivered independent “superstations” and some low-power television stations.

In March 2011, the FCC initiated a rulemaking proceeding to reform its retransmission consent rules, based, in part, on a petition submitted by a coalition of fourteen public interest groups and multi-channel video programming distributors (“MVPDs”), including TWC. In March 2014, the FCC revised its rules to provide that joint negotiation of retransmission consent by stations that are ranked among the top four stations in a market (as measured by audience share) and are not commonly owned constitutes a violation of the statutory duty to negotiate retransmission consent in good faith. The FCC also sought further comment on whether to modify or eliminate its network non-duplication and syndicated exclusivity rules in light of changes in the video marketplace. TWC is unable to predict what additional action, if any, the FCC might take in connection with retransmission consent.

The Communications Act also permits franchising authorities to negotiate with cable operators for channels for public, educational and governmental access programming. It also requires a cable system with 36 or more activated channels to designate 15 percent of its channel capacity for commercial leased access by third parties, which limits the amount of capacity TWC has available for other programming and other uses. The FCC regulates the rates and some terms and conditions of third-party commercial use of TWC’s channel capacity. Revisions to such rules adopted in 2008 requiring substantial reduction to the rates TWC can charge for leased access have been stayed pursuant to an appeal in the U.S. Court of Appeals for the Sixth Circuit. If implemented, these regulations could significantly increase the Company’s costs and burdens associated with leased access requirements.

Program carriage. The Communications Act and the FCC’s “program carriage” rules restrict cable operators and MVPDs from unreasonably restraining the ability of an unaffiliated programming vendor to compete fairly by discriminating against the programming vendor on the basis of its non-affiliation in the selection, terms or conditions for carriage. In August 2011, the FCC issued an order, which, among other things, established rules regarding what a complaint must demonstrate to establish a prima facie case of a program carriage violation and established procedures for consideration by the FCC’s Media Bureau of a complainant’s request for a temporary standstill of the price, terms and other conditions of an existing programming contract pending the FCC’s resolution of a complaint proceeding. In September 2013, the court vacated the FCC’s temporary standstill rules, finding that they were promulgated in violation of the Administrative Procedure Act of 1946. The FCC’s August 2011 order also contained a notice of proposed regulations that could further expand program carriage regulation. This rulemaking proceeding remains pending, and TWC is unable to predict what additional action, if any, the FCC might take in connection with program carriage.

Subscriber rates. The Communications Act and the FCC’s rules regulate and limit the rates that TWC may charge for basic cable service and equipment in communities that are not subject to “effective competition,” as defined by federal law. Where there has been no finding by the FCC of effective competition, federal law authorizes franchising authorities to regulate the monthly rates charged by the operator for the minimum level of video programming service, referred to as basic service tier or BST, which generally includes local broadcast television signals, satellite-delivered broadcast networks and superstations, local origination channels, 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 that approximately 85% of the communities TWC serves are subject to “effective competition.”

Pole attachment regulation. The Communications Act requires that investor-owned utilities provide cable systems and telecommunications carriers with non-discriminatory access to any pole, conduit or right-of-way controlled by those utilities. The Communications Act permits the FCC to regulate the rates, terms and conditions imposed by these utilities for cable systems’ and telecommunications carriers’ use of utility poles and conduit space. States are permitted to preempt FCC jurisdiction over pole attachments through certifying that they regulate the terms of attachments themselves. Many states in which TWC operates have done so. Rates for attachments used to provide “cable” services and “telecommunications” services are calculated under different provisions of the Communications Act, and the rates for telecommunications attachments have historically been higher than the rates for cable attachments. In January 2014, the FCC sought comment on a petition filed by Union Electric Company regarding the legal classification of Voice over Internet Protocol (“VoIP”) services for purposes of assessing pole attachment rates. The matter remains pending before the FCC. It is uncertain when the FCC will rule on this issue or how any regulation it adopts might affect TWC. The FCC recently indicated that its forthcoming “net neutrality” or “Open Internet” order would apply pole attachment regulation to

providers of broadband Internet access services. It is uncertain what specific regulations the FCC will adopt or how any such regulations might affect TWC. FCC action is expected in February 2015 or shortly thereafter. For further discussion of the FCC’s net neutrality proceeding, see the discussion in “Business—Regulatory Matters—High-speed Internet Access Services” and “Risk Factors—‘Net neutrality’ regulation 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.”

In addition, some of the poles TWC uses are exempt from federal or state regulation because they are owned by utility cooperatives and municipal entities. These entities may not renew TWC’s existing agreements when they expire, and they may require TWC to pay substantially increased fees. A number of these entities are currently seeking to impose substantial rate increases. For further discussion of pole attachment rates, see the discussion in “Risk Factors—TWC may encounter substantially increased pole attachment costs.”

Equipment regulation. The FCC has adopted regulations intended to promote the retail availability and sale of set-top 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 navigation and conditional access security functions. The FCC has not applied these regulations to DBS operators. In December 2014, Congress enacted the STELA Reauthorization Act of 2014 (“STELAR”), which will repeal, as of December 4, 2015, the federal mandate banning cable operators from integrating security into their set-top boxes. STELAR directs the FCC to establish an advisory committee of technical experts to study and report findings and recommendations to promote the retail availability of set-top boxes. TWC is unable to predict what, if any, proposals might be adopted and implemented or what effect such requirements may have on TWC’s business.

In 2012, TWC joined with 14 other MVPDs and device manufactures to launch a Set-Top Box Energy Conservation Voluntary Agreement (the “Set-Top Box Agreement”) to continue to improve the energy efficiency of set-top boxes through 2017. In 2013, the Set-Top Box Agreement was expanded to include additional devices and establish more stringent energy conservation commitments that will become effective in 2017.

Copyright regulation. TWC’s cable systems provide subscribers with, among other things, content from local and distant television broadcast stations. TWC generally does not obtain a license to use the copyrighted performances contained in these stations’ programming directly from content owners. Instead, in exchange for filing reports with the U.S. Copyright Office and contributing a percentage of basic service revenue to a federal copyright royalty pool, cable operators obtain rights to retransmit copyrighted material contained in broadcast signals pursuant to a statutory license. The elimination or substantial modification of this statutory copyright license has been the subject of ongoing legislative and administrative review and, if eliminated, modified or interpreted differently by the U.S. Copyright Office, could adversely affect TWC’s ability to obtain suitable programming and substantially increase TWC’s programming costs or copyright payments.

In addition, when TWC obtains programming from third parties, TWC generally obtains licenses that include any necessary authorizations to transmit the music included in it. When TWC creates its own programming and provides various other programming or related content, including local origination programming and advertising that TWC inserts into cable-programming networks, TWC is required to obtain any necessary music performance licenses directly from the rights holders. These rights are generally controlled by three music performance rights organizations, each with rights to the music of various composers. TWC generally has obtained the necessary licenses, either through negotiated licenses or through procedures established by consent decrees entered into by some of the music performance rights organizations.

Tax. Under the Telecommunications Act of 1996, DBS providers benefit from federal preemption of locally imposed or administered taxes and fees on video services, including those borne by the Company and its customers. Several states have enacted or are considering parity tax measures to equalize the tax and fee burden imposed on DBS and cable video services. DBS providers have been challenging such parity efforts in the courts, Congress and, increasingly, state legislatures in an effort to maintain their competitive pricing advantage and preclude states from implementing such parity

tax measures. Thus far, the states have prevailed in the federal and state courts with respect to legal challenges to such tax parity statutes with the exception of Kentucky. The state of Kentucky is appealing a recent unpublished Kentucky Court of Appeals decision that held Kentucky’s parity statute unconstitutional under the Kentucky Constitution. There can be no assurance as to the outcome with respect to cases still pending and ongoing legislative efforts.

Franchising. Cable operators generally operate their systems under non-exclusive franchises. Franchises are awarded, and cable operators are regulated, by state franchising authorities, local franchising authorities, or both. Such governmental authorities often must approve a transfer of systems to another party. Franchise agreements typically require payment of franchise fees and contain regulatory provisions addressing, among other things, upgrades, service quality, cable service to schools and other public institutions, insurance and indemnity bonds. The terms and conditions of cable franchises vary from jurisdiction to jurisdiction. The Communications Act provides protections against many unreasonable terms. In particular, the Communications Act imposes a ceiling on franchise fees of five percent of revenues derived from cable service. TWC generally passes the franchise fee on to its subscribers, listing it as a separate item on the bill.

Franchise agreements usually have a term of ten to 15 years from the date of grant, although some renewals may be for shorter terms. Franchise agreements usually are terminable only if the cable operator fails to comply with material provisions. TWC has not had a franchise terminated due to breach. After a franchise agreement expires, a local franchising authority may seek to impose new and more onerous requirements, including requirements to upgrade facilities, to increase channel capacity and to provide various new services. Federal law, however, provides significant substantive and procedural protections for cable operators seeking renewal of their franchises. In addition, although TWC occasionally reaches the expiration date of a franchise agreement without having a written renewal or extension, TWC generally has the right to continue to operate, either by agreement with the local franchising authority or by law, while continuing to negotiate a renewal. In the past, substantially all of the material franchises relating to TWC’s systems have been renewed by the relevant local franchising authority, though sometimes only after significant time and effort.

At the state level, several states have enacted statutes intended to streamline entry by additional video competitors, some of which provide more favorable treatment to new entrants than to existing providers. Despite TWC’s efforts and the protections of federal law, it is possible that some of TWC’s franchises may not be renewed, and TWC may be required to make significant additional investments in its cable systems in response to requirements imposed in the course of the franchise renewal process.

Cable Programming Services. The Communications Act and the FCC impose regulatory obligations on cable programming services, including the regional sports networks and local programming services provided by TWC. For instance, FCC regulations generally prevent cable networks affiliated with cable operators from favoring affiliated cable operators over competing MVPDs such as DBS providers. In 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 any such exclusive contract would be subject to a case-by-case review in response to a complaint alleging unfair methods of competition or unfair or deceptive acts that might prevent competitors from providing programming to consumers. The FCC is also considering proposals to establish presumptions that could make it easier for MVPDs to make complaints about exclusive contracts and to use buying groups to purchase programming. It is unclear whether the FCC will adopt such regulations and, if adopted, what impact such rules might have on TWC’s business.

High-speed Internet Access Services

TWC provides high-speed Internet access services over its existing cable facilities. In 2002, the FCC determined that cable-provided high-speed Internet access service is an interstate “information service” rather than a “cable service” or a “telecommunications service,” as those terms are defined in the Communications Act. That determination was later sustained by the U.S. Supreme Court. Under the “information service” classification, the service is not subject to regulation as either a cable service or a telecommunications service under federal, state or local law. As discussed below, a recent court decision and other events have caused the FCC to consider reclassifying high-speed Internet access service as a telecommunications service under Title II of the Communications Act.

“Net neutrality” regulations. Over the past several years, disparate groups have adopted the term “net neutrality” in connection with their efforts to persuade Congress and regulators to adopt rules that are designed to safeguard consumers’ access to lawful content and services via broadband Internet access services. Such rules could limit the ability of broadband Internet access providers to effectively manage or operate their broadband networks.

In December 2010, the FCC adopted “open Internet” or “net neutrality” regulations pursuant to Section 706 of the Telecommunications Act of 1996 (the “Telecommunications Act”), among other statutory provisions. The rules, which became effective in November 2011, imposed transparency requirements on all broadband Internet access providers, prohibited all broadband Internet access providers from blocking access to lawful content, applications and services or non-harmful devices (the “anti-blocking rules”), and prohibited fixed broadband Internet access providers from unreasonably discriminating in transmitting lawful network traffic (the “non-discrimination rules”). The anti-blocking rules and the non-discrimination rules included exclusions for “reasonable network management.” In January 2014, the U.S. Court of Appeals for the D.C. Circuit vacated the anti-blocking rules and the non-discrimination rules, while finding that the FCC did have the statutory authority to implement some regulation of the Internet so long as its rules reasonably advance the objectives of Section 706 of the Telecommunications Act (promotion of broadband deployment) and do not contravene other express statutory mandates.

The FCC has indicated that it intends to reclassify broadband Internet access services as a telecommunications service subject to regulation under Title II of the Communications Act, including a grant of “forbearance” from enforcement of many regulatory obligations applicable to telecommunications carriers under Title II. The FCC also has announced that it will adopt regulations addressing Internet traffic exchange and peering arrangements. It is uncertain what specific regulations the FCC will adopt or how any such regulations might affect TWC. Finally, various members of Congress have sought to adopt statutory net neutrality legislation in light of the decision of the U.S. Court of Appeals for the D.C. Circuit, President Obama’s recent support of Title II reclassification and expectations that the FCC will adopt new net neutrality rules in February 2015 or shortly thereafter.

For further discussion of “net neutrality” and its impact on TWC, see the discussion in “Risk Factors—‘Net neutrality’ regulation 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 requirements, including the Communications Assistance for Law Enforcement Act (“CALEA”), which requires that high-speed data providers implement certain network capabilities to assist law enforcement agencies in conducting surveillance of criminal suspects.

Voice Services

TWC currently offers residential and business voice services using VoIP technology. The FCC has yet to classify VoIP services as regulated telecommunications services or Title I information services, but has afforded VoIP providers the flexibility to offer their services pursuant to either category. Traditional providers of circuit-switched telephone services and VoIP providers that offer their services as a telecommunications service generally are subject to more regulation than if the service were offered as a Title I information service.

The FCC has extended a number of traditional telephone carrier regulations to all interconnected VoIP providers, including requiring them to: provide E911 capabilities as a standard feature to their subscribers; comply with the requirements of CALEA to assist law enforcement investigations in providing, after a lawful request, call content and call identification information; contribute to the Universal Service Fund (“USF”); pay regulatory fees; comply with subscriber privacy rules; provide access to their services to persons with disabilities; comply with service discontinuance requirements and local number portability (“LNP”) rules when subscribers change telephone providers, and report certain service outages. In addition, certain states have sought to impose state regulation on interconnected VoIP providers such as TWC.

TWC has submitted to state telephone regulation and to being classified as a telecommunications carrier in certain states in connection with TWC’s provision of discounted Lifeline telephone services to low-income customers. In order to participate in the Lifeline program and receive reimbursement from the federal and, if applicable, state USFs, voice providers must be designated as “Eligible Telecommunications Carriers.” Therefore, in the states in which TWC has deployed Lifeline telephone services, TWC is regulated as a telecommunications carrier and is subject to Eligible Telecommunications Carrier requirements. This places additional operational, regulatory and administrative burdens on TWC’s business and could expose TWC to additional regulatory risk in connection with its compliance with state and federal regulation.

In November 2011, in its proceeding considering comprehensive intercarrier compensation reform, including the appropriate compensation regime applicable to interconnected VoIP traffic over the public switched telephone network (“PSTN”), the FCC released an Order adopting rules providing greater clarity regarding the compensation rights and obligations of carriers that originate or terminate VoIP traffic, making clear that origination and termination charges may be imposed when an entity uses IP facilities to transmit traffic to or from a party’s premises and establishing default rates for such traffic. At the same time, these rules reduced the amount of intercarrier compensation that providers such as TWC could collect from long-distance carriers terminating calls to customers. In addition, the FCC issued a Further Notice of Proposed Rulemaking seeking to adopt rules to govern IP-to-IP interconnection for voice services and indicating that carriers should negotiate such agreements in good faith during the pendency of such proceeding. In November 2012, AT&T filed a petition with the FCC asking it to commence a proceeding to address the transition of the circuit-switched PSTN to an all IP network, including IP interconnection. The FCC sought comment on this petition as well as a related petition filed in November 2012 by representatives of some small incumbent telephone companies (“RLECs”) seeking USF funding for IP interconnection, and in January 2014, released an Order to implement certain IP Transition Trials. Also, in November 2014, the FCC sought comment on ensuring reliable backup power for IP voice services in the event of a power outage. It is unclear whether and when the FCC or Congress will adopt further rules relating to IP interconnection or other regulation for IP voice services and how such rules would affect TWC’s interconnected VoIP service.

Commercial Networking and Transport Services

Entities providing point-to-point and other transport services generally are subject to various kinds of regulation. In particular, in connection with intrastate transport services, state regulatory authorities require such providers to obtain and maintain certificates of public convenience and necessity and to file tariffs setting forth the service’s rates, terms and conditions and to have just, reasonable and non-discriminatory rates, terms and conditions. Interstate transport services are governed by similar federal regulations. In addition, providers generally may not transfer assets or ownership without receiving approval from or providing notice to state and federal authorities. Finally, providers of point-to-point and similar transport services are required to contribute to various state and federal regulatory funds, including state universal funds and the USF.

Privacy and Security Regulation

Federal, state and local laws, regulations and ordinances impose requirements on how the Company handles personally identifiable and other 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 or market to consumers using email or the telephone, including state data breach notification statutes. These notification laws generally require that a business give notice to its customers whose financial information has been disclosed because of a security breach. In addition, the Federal Trade Commission (the “FTC”) applies the identity theft red flag rules under the Fair and Accurate Credit Transactions Act of 2003, which are designed to detect the warnings signs of identity theft. In 2013, the SEC and the Commodity Futures Trading Commission jointly adopted similar identity theft red flag rules. TWC has a compliance program as required under these rules. A number of bills have been introduced in Congress regarding cybersecurity, data breach and consumer privacy, but the scope of such requirements, if passed, is unclear at this time.

TWC is also subject to state and federal “do not call” laws restricting telemarketing and state and federal laws restricting unsolicited commercial emails. Additional and more restrictive requirements may be imposed if and to the extent that state or local authorities establish their own privacy or security standards or if Congress enacts new privacy or security legislation.

Environmental Regulation

TWC’s business operations are subject to environmental laws and regulations, including regulations governing the use, storage, disposal of, and exposure to, hazardous materials, the release of pollutants into the environment and the remediation of contamination. TWC is currently subject to an investigation by the California Attorney General and the Alameda County, California District Attorney regarding whether certain of TWC’s waste disposal policies, procedures and practices are in violation of the California Business and Professions Code and the California Health and Safety Code. For additional information about this investigation, see Note 18 to the accompanying consolidated financial statements. As a result of the increasing public awareness concerning the importance of environmental regulations, these regulations have become more stringent over time, and pending or proposed regulations, such as regulations addressing climate change concerns, including greenhouse gas emission limits or cap and trade programs, could impact TWC’s operations and costs.

Other Federal Regulatory Requirements

Federal law also includes numerous other requirements applicable to some extent to TWC’s business or one or more of TWC’s services. These provisions apply to customer service, use of credit reports, marketing practices, equal employment opportunity, technical standards and equipment compatibility, antenna structure notification, marking, lighting, emergency alert system requirements, disability access, loudness of commercial advertisements and the collection of annual regulatory fees, which are calculated based on the number of subscribers served, the types of FCC licenses held and certain interstate revenue thresholds. In addition, there are various rules prohibiting joint ownership of cable systems and other kinds of communications facilities. Relatedly, the FCC has sought to place limits on the number of (i) subscribers a cable operator may reach through systems in which it holds an ownership interest, and (ii) affiliated programming channels that a cable operator may carry on a cable system. The FCC also actively regulates other aspects of TWC’s video services, including the mandatory blackout of syndicated, network and sports programming; customer service standards; political advertising; indecent or obscene programming; 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 subject to a number of requirements related to ensuring that the services are accessible to individuals with disabilities. Among other things, TWC’s voice services and email service must be accessible to and usable by persons with disabilities. TWC also is required to include closed captioning on certain video programming delivered to its customers and pass through video description information on certain of its video services. In October 2013, pursuant to the Twenty-First Century Communications and Video Accessibility Act of 2010, the FCC began adopting updated rules mandating audible accessibility of on-screen text menus and guides on cable set-top boxes and requiring closed captioning to be more easily activated on those devices. The FCC has several ongoing proceedings regarding the quality of closed captioning, captioning of online clips and other related issues.

TWC is unable to predict how these various regulations might be amended in the future and whether and how any such changes might affect its business. In addition, while TWC believes that it is in substantial compliance with FCC and state regulations, it is occasionally subject to enforcement actions at the FCC, which can result in the payment of fines or the imposition of other agency sanctions.

TWE-A/N Partnership

Time Warner Entertainment-Advance/Newhouse Partnership (“TWE-A/N”) is a partnership that was formed in 1995 between Time Warner Entertainment Company, L.P. (“TWE”), a former subsidiary of TWC, and Advance/Newhouse Partnership (“A/N”), a partnership owned by 100% 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 in TWE-A/N. The general partnership interests in TWE-A/N are held by TWCE (the “TW Partner”) and A/N. The TW Partner also holds preferred partnership interests.

2002 restructuring of TWE-A/N. TWE-A/N was restructured in 2002. As a result of this restructuring, cable systems and their related assets and liabilities serving approximately 2.1 million video subscribers as of December 31, 2002 located primarily in Florida (the “A/N Systems”) were transferred to a 100% owned subsidiary of TWE-A/N (the “A/N Subsidiary”). As part of the restructuring, effective August 1, 2002, A/N’s interest in TWE-A/N was converted into an interest that tracks the economic performance of the A/N Systems, while the TW Partner retains the economic interests and associated liabilities in the remaining TWE-A/N cable systems. TWE-A/N’s financial results, other than the results of the A/N Systems, are consolidated with TWC’s.

Management and operations of TWE-A/N. Subject to certain limited exceptions, TWCE is the managing partner, with exclusive management rights of TWE-A/N, other than with respect to the A/N Systems. Also, subject to certain limited exceptions, A/N has authority for the supervision of the day-to-day operations of the A/N Subsidiary and the A/N Systems. In connection with the 2002 restructuring, TWE entered into a services agreement with A/N and the A/N Subsidiary under which TWE agreed to exercise various management functions, including oversight of programming and various engineering-related matters. TWE and A/N also agreed to periodically discuss cooperation with respect to new product development. Following the September 30, 2012 internal reorganization, TWCE performs these functions pursuant to the services agreement. TWC receives a fee for providing the A/N Subsidiary with high-speed data services and the management functions noted above. These arrangements may be terminated by either party on 12 months’ notice.

Restrictions on transfer—TW Partner. The TW Partner is generally permitted to directly or indirectly dispose of its entire partnership interest at any time to a 100% owned affiliate of TWCE. In addition, the TW Partner is also permitted to transfer its partnership interests through a pledge to secure a loan, or a liquidation of TWCE in which TWC, or its affiliates, receives a majority of the interests of TWE-A/N held by the TW Partner. TWCE is allowed to issue additional partnership interests in TWCE so long as TWC continues to own, directly or indirectly, either 35% or 43.75% of the residual equity capital of TWCE, depending on when the issuance occurs.

Restrictions on transfer—A/N Partner. A/N is generally permitted to directly or indirectly transfer its entire partnership interest at any time to certain members of the Newhouse family or specified affiliates of A/N. A/N is also permitted to dispose of its partnership interest through a pledge to secure a loan and in connection with specified restructurings of A/N.

Restructuring and termination rights of the partners. TWCE and A/N each has the right to cause TWE-A/N to be restructured at any time. Upon a restructuring, TWE-A/N is required to distribute the A/N Subsidiary with all of the A/N Systems to A/N in complete redemption of A/N’s interests in TWE-A/N, and A/N is required to assume all liabilities of the A/N Subsidiary and the A/N Systems. To date, neither TWCE nor A/N has delivered notice of the intent to cause a restructuring of TWE-A/N.

TWCE’s regular right of first offer. Subject to exceptions, A/N and its affiliates are obligated to grant TWCE a right of first offer prior to any sale of assets of the A/N Systems to a third party.

TWCE’s special right of first offer. Within a specified time period following the first, seventh, thirteenth and nineteenth anniversaries of the deaths of two specified members of the Newhouse family (whose deaths have not yet occurred), A/N has the right to deliver notice to TWCE stating that it wishes to transfer some or all of the assets of the

A/N Systems, thereby granting TWCE the right of first offer to purchase the specified assets. Following delivery of this notice, an appraiser will determine the value of the assets proposed to be transferred. Once the value of the assets has been determined, A/N has the right to terminate its offer to sell the specified assets. If A/N does not terminate its offer, TWCE will have the right to purchase the specified assets at a price equal to the value of the specified assets determined by the appraiser. If TWCE does not exercise its right to purchase the specified assets, A/N has the right to sell the specified assets to an unrelated third party within 180 days on substantially the same terms as were available to TWCE.

Item 1A. Risk Factors.

TWC faces a wide range of competition, and its business and financial results could be adversely affected if it does not compete effectively.

TWC faces significant competition, and the rapid development of new technologies, services and products has led to the entry of many new competitors, further intensifying the competitive environment. Any inability to compete effectively could have an adverse effect on TWC’s financial and operating results and return on capital expenditures due to possible increases in the cost of gaining and retaining subscribers and lower per subscriber revenue, could slow or cause a decline in TWC’s growth rates, and reduce TWC’s revenue. As TWC expands and introduces new and enhanced services, TWC may be subject to competition from other providers of those services. TWC cannot predict the extent to which this competition will affect its future business and financial results or return on capital expenditures.

Future advances in technology, as well as changes in the marketplace, in the economy and in the regulatory and legislative environments, may result in changes to the competitive landscape. For additional information regarding the competition faced by TWC, see “Business—Competition” and “—Regulatory Matters.”

TWC faces risks relating to competition for the leisure time and discretionary spending of audiences, which has intensified in part due to advances in technology and changes in consumer expectations and behavior.

In addition to the various competitive factors discussed above, TWC’s business is subject to risks relating to increasing competition for the leisure time and discretionary spending of consumers. TWC’s business competes with all other sources of entertainment 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 entertainment and information delivery choices available to consumers and intensified the challenges posed by audience fragmentation. The increasing number of choices available to audiences, including low-cost or free choices, could negatively impact not only consumer demand for TWC’s products and services, but also advertisers’ willingness to purchase advertising from TWC. TWC’s failure to effectively anticipate or adapt to new technologies and changes in consumer expectations and behavior could significantly adversely affect TWC’s competitive position and its business and results of operations.

An extended period of slow growth or a significant deterioration in the economy may negatively impact TWC’s ability to attract new subscribers and generate increased revenue.

The U.S. economy is experiencing an uneven recovery following a protracted slowdown, and the future economic environment may continue to be challenging. A continuation or further weakening of these economic conditions could lead to further reductions in consumer demand for the Company’s services, especially services for which additional charges are imposed, and to a continued increase in the number of homes that replace their video service with Internet-delivered and/or over-air content, which would negatively impact TWC’s ability to attract customers, increase rates and maintain or increase revenue. In addition, providing video services is an established and highly penetrated business. TWC’s ability to gain new video subscribers is dependent to a large extent on growth in occupied housing in TWC’s service areas, which is influenced by both national and local economic conditions. In the absence of renewed growth in the number of occupied homes in TWC’s operating areas, TWC’s ability to gain new video subscribers may be negatively impacted. Weak economic conditions may also have a negative impact on the Company’s advertising revenue.

TWC’s business is characterized by rapid technological change, and if TWC does not adapt to technological changes and respond appropriately to changes in consumer demand, its competitive position may be harmed.

TWC operates in a highly competitive, consumer-driven and rapidly changing environment. Its success is, to a large extent, dependent on its ability to acquire, develop, adopt, upgrade and exploit new and existing technologies to address consumers’ changing demands and distinguish its services from those of its competitors. TWC may not be able to accurately predict technological trends or the success of new products and services. If TWC chooses technologies or equipment that are less effective, cost-efficient or attractive to its customers than those chosen by its competitors, or if TWC offers services that fail to appeal to consumers, are not available at competitive prices or that do not function as expected, TWC’s competitive position could deteriorate, and TWC’s business and financial results could suffer.

The ability of some of TWC’s competitors to introduce new technologies, products and services more quickly than TWC may adversely affect TWC’s competitive position. Furthermore, advances in technology, decreases in the cost of existing technologies or changes in competitors’ product and service offerings may require TWC in the future to make additional research and development expenditures or to offer at no additional charge or at a lower price certain products and services TWC currently offers to customers separately or at a premium. In addition, the uncertainty of the Company’s ability and the costs to obtain intellectual property rights from third parties could impact TWC’s ability to respond to technological advances in a timely and effective manner.

TWC relies on network and information systems and other technology, and a disruption or failure of such networks, systems or technology as a result of computer viruses, “cyber attacks,” misappropriation of data or other malfeasance, as well as outages, natural disasters (including extreme weather), terrorist attacks, accidental releases of information or 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 as computer hacking, dissemination of computer viruses, worms and other destructive or disruptive software, “cyber attacks,” process breakdowns, denial of service attacks and other malicious activity pose increasing risks. Both unsuccessful and successful “cyber attacks” on companies have continued to increase in frequency, scope and potential harm in recent years and, because the techniques used in such attacks have become more sophisticated and change frequently, TWC may be unable to anticipate these techniques or implement adequate preventative measures. While from time to time attempts are made to access TWC’s network, these attempts have not as yet resulted in any material release of information, degradation or disruption to the Company’s network and information systems.

TWC’s network and information systems are also vulnerable to damage or interruption from power outages, natural disasters (including extreme weather arising from short-term weather patterns or any long-term changes), terrorist attacks and similar events. Any of these events could have an adverse impact on TWC and its customers, including degradation of service, service disruption, excessive call volume to call centers and damage to TWC’s plant, equipment, data and reputation. Such an event also could result in large expenditures necessary to repair or replace such networks or information systems or to protect them from similar events in the future. Further, the impacts associated with extreme weather or any long-term changes, such as rising sea levels or increased and intensified storm activity, may cause increased business interruptions or may require the relocation of some of TWC’s facilities. Significant incidents could result in a disruption of TWC’s operations, customer dissatisfaction or a loss of customers or revenue.

Furthermore, TWC’s operating activities could be subject to risks caused by misappropriation, misuse, leakage, falsification or accidental release or loss of information maintained in the information technology systems and networks of TWC and third-party vendors, including customer, personnel and vendor data. TWC provides certain confidential, proprietary and personal information to third parties in connection with its business, and there is a risk that this information may be compromised.

As a result of the increasing awareness concerning the importance of safeguarding personal information, the potential misuse of such information and legislation that has been adopted or is being considered regarding the protection, privacy

and security of personal information, information-related risks are increasing, particularly for businesses like TWC’s that handle a large amount of personal customer data. TWC could be exposed to significant costs if such risks were to materialize, and such events could damage the reputation and credibility of TWC and its business and have a negative impact on its revenue. TWC could be subject to regulatory actions and claims made by consumers in private litigations involving privacy issues related to consumer data collection and use practices. TWC also could be required to expend significant capital and other resources to remedy any such security breach.

TWC’s business may be adversely affected if TWC cannot continue to license or enforce the intellectual property rights on which its business depends.

TWC relies on patent, copyright, trademark and trade secret laws and licenses and other agreements with its employees, customers, suppliers and other parties to establish and maintain its intellectual property rights in technology and the products and services used in TWC’s operations. Also, because of the rapid pace of technological change, TWC both develops its own technologies, products and services and relies on technologies developed or licensed by third parties. However, any of TWC’s intellectual property rights could be challenged or invalidated, or such intellectual property rights may not be sufficient to permit TWC to take advantage of current industry trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of certain product or service offerings or other competitive harm. TWC may not be able to obtain or continue to obtain licenses from these third parties on reasonable terms, if at all. In addition, claims of intellectual property infringement could require TWC to enter into royalty or licensing agreements on unfavorable terms, incur substantial monetary liability or be enjoined preliminarily or permanently from further use of the intellectual property in question, which could require TWC to change its business practices or offerings and limit its ability to compete effectively. Even unsuccessful claims can be time-consuming and costly to defend and may divert management’s attention and resources away from TWC’s businesses. In recent years, the number of intellectual property infringement claims has been increasing in the communications and entertainment industries, and, with increasing frequency, TWC is party to litigation alleging that certain of its services or technologies infringe the intellectual property rights of others.

Adverse changes 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 more difficult for TWC to obtain financing. In addition, TWC’s borrowing costs may be affected by debt ratings assigned by independent ratings agencies that are based, in significant part, on TWC’s leverage and its performance as measured by customary credit metrics. A decrease in these ratings would likely increase TWC’s cost of borrowing and make it more difficult for TWC to obtain financing.

The accounting treatment of goodwill and other identified intangibles could result in future asset impairments, which would be recorded as operating losses.

Authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) requires that goodwill and other intangible assets deemed to have indefinite useful lives, such as cable franchise rights, cease to be amortized. The guidance requires that goodwill and certain intangible assets be tested annually for impairment or upon the occurrence of a triggering event. Under the accounting rules, the Company may elect to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If an impairment is more likely than not to have occurred, a quantitative assessment is required. If the quantitative assessment determines that the carrying value of goodwill or a certain intangible asset exceeds its estimated fair value, an impairment charge is recognized in an amount equal to that excess. Any such impairment is required to be recorded as a noncash operating loss.

TWC’s 2014 annual impairment analysis, which was a qualitative assessment performed as of July 1, 2014, did not result in any goodwill or cable franchise rights impairment charges. However, it is possible that impairment charges may be recorded in the future to reflect potential declines in fair value. See “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Critical Accounting Policies and Estimates—Fair Value Estimates—Indefinite-lived Intangible Assets and Goodwill.”

Increases in programming and retransmission costs or the inability to obtain popular programming could adversely affect TWC’s operations and financial results.

Video programming and retransmission costs represent a major component of TWC’s expenses. These costs are expected to continue to increase as the cost of obtaining desirable programming continues to increase. TWC’s video programming costs as a percentage of video revenue have increased over recent years and will continue to increase over the next coming years as cable programming and broadcast station retransmission consent cost increases outpace growth in video revenue. If TWC is unable to adjust video service pricing to offset such programming and retransmission costs, or to offset such costs through the sale of additional services, the increasing cost could have an adverse impact on TWC’s financial results.

Furthermore, as TWC’s contracts with content providers expire, there can be no assurance that they will be renewed on acceptable terms or that they will be renewed at all. TWC’s failure to carry programming that is attractive to its subscribers could adversely impact TWC’s subscriber levels, operations and financial results. In addition, if TWC’s high-speed data subscribers are unable to access desirable content online because content providers block or limit access by TWC subscribers as a class, TWC’s ability to gain and retain subscribers, especially high-speed data subscribers, may be negatively impacted.

TWC’s business may be adversely affected if it fails to reach distribution agreements providing for carriage of the Lakers’ RSNs and SportsNet LA or if such agreements are on 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 Dodgers’ baseball games and other sports programming. There can be no assurance that TWC will be successful in reaching agreements with other MVPDs to distribute sports programming for which TWC has distribution rights or responsibility for affiliate sales services or, if agreements are reached, that revenue from such agreements will exceed or sufficiently offset TWC’s payments under the rights or services agreements, as well as the other costs TWC incurs in producing and distributing the programming pursuant to the terms of these agreements.

The Company may fail to complete the proposed merger with and into Comcast and, even if the merger is successfully completed, the anticipated benefits to the Company’s stockholders may not be realized.

On February 12, 2014, the Company entered into the Merger Agreement, whereby the Company agreed to merge with and into a 100% owned subsidiary of Comcast. The Company and Comcast are subject to certain antitrust, competition and communications laws, and the proposed merger is subject to review and approval, including review by the Antitrust Division of the U.S. Department of Justice and the FCC and approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The proposed merger is also subject to a number of customary closing conditions. The Company or Comcast may, however, be unable to obtain the necessary approvals or otherwise satisfy the conditions required to complete the transaction on a timely basis or at all. The conditions to the proposed merger could prevent or delay the completion of the transaction.

There can be no assurance that regulators will approve the transaction. Regulators may impose conditions, terms, obligations or restrictions on the proposed merger that have the effect of delaying or preventing completion of the proposed merger. Delays in the merger closing, including as a result of delays in obtaining regulatory approval, could divert attention from the Company’s ongoing operations on the part of management and employees and adversely impact the Company. Failure to complete the proposed merger for any reason could negatively impact the Company’s ability to motivate and retain employees, its relationships with subscribers and customers, its stock price and its future business and financial results.

Furthermore, even in the event that the proposed merger is successfully completed, there can be no assurance that the anticipated benefits to the Company’s stockholders will be realized if the businesses of the Company and Comcast are not successfully integrated or the integration process results in a loss of or failure to attract, motivate or retain employees, the

loss of subscribers and customers, the disruption to either the Company’s or both companies’ ongoing business or in unexpected integration issues, higher than expected integration costs or an overall post-completion integration process that takes longer than originally anticipated. Failure to complete or realize the benefits and cost savings of the merger could negatively impact the stock price and the future business and financial results of the combined company after the merger.

TWC may not be able to obtain necessary hardware, software and operational support.

TWC depends on a limited number of third-party suppliers and licensors to supply some of the hardware, software and operational support necessary to provide some of TWC’s services. Some of these vendors represent TWC’s sole source of supply or have, either through contract or as a result of intellectual property rights, a position of some exclusivity. If any of these parties breaches or terminates its agreement with TWC or otherwise fails to perform its obligations in a timely manner, demand exceeds these vendors’ capacity, they experience operating or financial difficulties, they significantly increase the amount TWC pays for necessary products or services, or they cease production of any necessary product due to lack of demand, profitability, a change in their ownership or otherwise, TWC’s ability to provide some services may be materially adversely affected. Also, as a result of the pending merger, parties with which TWC does business may experience uncertainty and may attempt to negotiate changes to existing agreements with TWC to the detriment of TWC. Any of these events could materially and adversely affect TWC’s ability to retain and attract subscribers and have a material negative impact on TWC’s operations, business, financial results and financial condition.

TWC’s business is subject to extensive governmental regulation, which could adversely affect its operations.

TWC’s video and voice services are subject to extensive regulation at the federal, state and local levels. In addition, the federal 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 could have an adverse impact on TWC’s services. TWC expects that legislative enactments, court actions and regulatory proceedings will continue to clarify and, in some cases, change the rights of cable companies and other entities providing video, high-speed data and voice services under the Communications Act and other laws, possibly in ways that TWC has not foreseen. The results of these legislative, judicial and administrative actions may materially affect TWC’s business operations.

Changes in broadcast carriage regulations could impose significant additional costs on TWC.

Although TWC would likely choose to carry the majority of primary feeds of full power stations voluntarily, so-called “must carry” rules require TWC to carry some local broadcast television signals on some of its cable systems that it might not otherwise carry. If the FCC seeks to revise or expand the “must carry” rules, such as to require carriage of multicast streams, TWC would be forced to carry video programming that it would not otherwise carry and potentially drop other, more popular programming in order to free capacity for the required programming, which could make TWC less competitive. Moreover, if the FCC adopts rules that are not competitively neutral, cable operators could be placed at a disadvantage versus other multi-channel video providers.

Under the program carriage rules, TWC could be compelled to carry programming services that it would not otherwise carry.

The Communications Act and the FCC’s “program carriage” rules restrict cable operators and MVPDs from unreasonably restraining the ability of an unaffiliated programming vendor to compete fairly by discriminating against the programming vendor on the basis of its non-affiliation in the selection, terms or conditions for carriage. Under a successful program carriage complaint, TWC might be compelled to carry programming services it would not otherwise carry and/or to do so on economic and other terms that it would not accept absent such compulsion. See “Business—Regulatory Matters—Video Services—Program carriage.” Compelled government carriage could reduce TWC’s ability to carry other, more desirable programming and non-video services, decrease its ability to manage its bandwidth efficiently and increase TWC’s costs, adversely affecting TWC’s competitive position.

“Net neutrality” regulation 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.

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, TWC needs the continued flexibility to develop and refine business models that respond to changing consumer uses and demands, to manage bandwidth usage efficiently and to continue to invest in its systems. TWC’s ability to do these things could be restricted by regulatory or legislative efforts to impose so-called “net-neutrality” or “Open Internet” requirements on broadband Internet access service providers.

Proponents of increased “net neutrality” regulation have called for the FCC to regulate broadband Internet access services as telecommunications services under Title II of the Communications Act, and the FCC has indicated that it intends to adopt the Title II regulatory approach. Reclassification of broadband Internet access services under Title II could subject such services to significant new regulation, including rate regulation, although the FCC has indicated that it intends to forbear, at least to some extent, from regulating broadband rates. FCC action is expected in February 2015 or shortly thereafter. In addition, various members of Congress have proposed to enact legislation banning the blocking of Internet traffic and imposing non-discrimination requirements on broadband Internet access providers, such as TWC. Such regulation or legislation could adversely impact TWC’s ability to operate its high-speed data network profitably and to undertake the upgrades and put into operation management practices that may be needed to continue to provide high quality high-speed data services and new services and could negatively impact TWC’s ability to compete effectively. Furthermore, such regulation or legislation could increase the taxes and fees imposed on TWC and its broadband services, particularly if the FCC does not forbear imposition of Federal Universal Service Fees on broadband or if Congress does not extend the Internet Tax Freedom Act (“ITFA”) moratorium. See “Business—Regulatory Matters—High-speed Internet Access Services—‘Net neutrality’ regulations.”

Rate regulation could materially adversely impact TWC’s operations, business, financial results or financial condition.

Under current FCC regulations, rates for BST video service and associated equipment are permitted to be regulated. In approximately 85% of the communities it serves, TWC is not subject to BST video rate regulation, either because the local franchising authority has not asked the FCC for permission to regulate rates or because the FCC has found that there is “effective competition.” Also, there is currently no federal rate regulation for TWC’s other services, including high-speed data and voice services. However, as noted above, reclassification of broadband Internet access services under Title II of the Communications Act could subject such services to rate regulation. Should the FCC or Congress adopt more extensive rate regulation for TWC’s video services or regulate the rates of other services, such as high-speed data and voice services, which could impede TWC’s ability to raise rates, or require rate reductions, such regulation could cause TWC’s business, financial results or financial condition to suffer.

TWC may encounter substantially increased pole attachment costs.

Under federal law, TWC has the right to attach cables carrying video and other services to telephone and similar poles of investor-owned utilities at regulated rates. However, because these cables may carry services other than video services, such as high-speed data services or new forms of voice services, some utility pole owners have sought to impose the telecommunications rate on TWC when it carries services other than video services over its attachments. The appropriate method for calculating pole attachment rates for cable operators that provide VoIP services remains unclear. In addition, it is unclear whether the expected reclassification of broadband Internet access services under Title II of the Communications Act could impact the rate TWC is required to pay for its attachments. In January 2014, the FCC sought comment on a petition regarding the legal classification of VoIP services for purposes of assessing pole attachment rates, and the petition is still pending.

Some of the poles TWC uses are exempt from federal regulation because they are owned by utility cooperatives and municipal entities. These entities may not renew TWC’s existing agreements when they expire, and they may require TWC to pay substantially increased fees. A number of these entities are currently seeking to impose substantial rate

increases. Any increase in TWC’s pole attachment rates or inability to secure continued pole attachment agreements with these cooperatives or municipal utilities on commercially reasonable terms could cause TWC’s business, financial results or financial condition to suffer.

The IRS (as defined below) and state and local tax authorities may challenge the tax characterizations of the Adelphia Acquisition, the Redemptions and the Exchange (each as defined below), or TWC’s related valuations, and any successful challenge by the IRS or state or local tax authorities could materially adversely affect TWC’s tax profile, significantly increase TWC’s future cash tax payments and significantly reduce TWC’s future earnings and cash flow.

The 2006 acquisition by TW NY Cable Holding Inc. (“TW NY”) and Comcast of assets comprising in aggregate substantially all of the cable assets of Adelphia Communications Corporation (the “Adelphia Acquisition”) was designed to be a fully taxable asset sale, the redemption by TWC of Comcast’s interests in TWC (the “TWC Redemption”) was designed to qualify as a tax-free split-off under section 355 of the Internal Revenue Code of 1986, as amended (the “Tax Code”), the redemption by TWE of Comcast’s interests in TWE (the “TWE Redemption” and collectively with the TWC Redemption, the “Redemptions”) was designed as a redemption of Comcast’s partnership interest in TWE, and the exchange between TW NY and Comcast immediately after the Adelphia Acquisition (the “Exchange”) was designed as an exchange of designated cable systems. There can be no assurance, however, that the Internal Revenue Service (the “IRS”) or state or local tax authorities (collectively with the IRS, the “Tax Authorities”) will not challenge one or more of such characterizations or TWC’s related valuations. Such a successful challenge by the Tax Authorities could materially adversely affect TWC’s tax profile (including TWC’s ability to recognize the intended tax benefits from these transactions), significantly increase TWC’s future cash tax payments and significantly reduce TWC’s future earnings and cash flow. The tax consequences of the Adelphia Acquisition, the Redemptions and the Exchange are complex and, in many cases, subject to significant uncertainties, including, but not limited to, uncertainties regarding the application of federal, state and local income tax laws to various transactions and events contemplated therein and regarding matters relating to valuation.

If the Separation Transactions (as defined below), including the Distribution (as defined below), do not qualify as tax-free, either as a result of actions taken or not taken by TWC or as a result of the failure of certain representations by TWC to be true, TWC has agreed to indemnify Time Warner Inc. for its taxes resulting from such disqualification, which would be significant.

As part of TWC’s separation from Time Warner Inc. (“Time Warner”) in March 2009 (the “Separation”), Time Warner received a private letter ruling from the IRS and Time Warner and TWC received opinions of 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 of a special cash dividend to holders of TWC’s outstanding Class A and Class B common stock, the conversion of each share of TWC’s outstanding Class A and Class B common stock into one share of TWC common stock, and the pro-rata dividend of all shares of TWC common stock held by Time Warner to holders of record of Time Warner’s common stock (the “Distribution” and, together with all of the transactions, the “Separation Transactions”), should generally qualify as tax-free to Time Warner and its stockholders for U.S. federal income tax purposes. The ruling and opinions rely on certain facts, assumptions, representations and undertakings from Time Warner and TWC regarding the past and future conduct of the companies’ businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not otherwise satisfied, Time Warner and its stockholders may not be able to rely on the ruling or the opinions and could be subject to significant tax liabilities. Notwithstanding the private letter ruling and opinions, the IRS could determine on audit that the Separation Transactions should be treated as taxable transactions if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or for other reasons, including as a result of significant changes in the stock ownership of Time Warner or TWC after the Distribution.

Under the tax sharing agreement among Time Warner and TWC, TWC generally would be required to indemnify Time Warner against its taxes resulting from the failure of any of the Separation Transactions to qualify as tax-free as a result of (i) certain actions or failures to act by TWC or (ii) the failure of certain representations made by TWC to be true.

In addition, even if TWC bears no contractual responsibility for taxes related to a failure of the Separation Transactions to qualify for their intended tax treatment, Treasury regulation section 1.1502-6 imposes on TWC several liability for all Time Warner federal income tax obligations relating to the period during which TWC was a member of the Time Warner federal consolidated tax group, including the date of the Separation Transactions. Similar provisions may apply under foreign, state or local law. Absent TWC causing the Separation Transactions to not qualify as tax-free, Time Warner has indemnified TWC against such several liability arising from a failure of the Separation Transactions to qualify for their intended tax treatment.

Tax legislation and administrative initiatives or challenges to the Company’s tax positions could adversely affect the Company’s results of operations and financial condition.

TWC operates in locations throughout the U.S. and, as a result, it is subject to the tax laws and regulations of the U.S. federal, state and local governments. From time to time, various legislative and/or administrative initiatives may be proposed that could adversely affect the Company’s tax positions. There can be no assurance that the Company’s effective tax rate or tax payments will not be adversely affected by these initiatives. As a result of state and local budget shortfalls due primarily to the economic environment as well as other considerations, certain states and localities have imposed or are considering imposing new or additional taxes or fees on TWC’s services or changing the methodologies or base on which certain fees and taxes are computed. Such potential changes include additional taxes or fees on TWC’s services that could impact its customers, competitive position, combined reporting and other changes to general business taxes, central/unit-level assessment of property taxes and other matters that could increase TWC’s income, franchise, sales, use and/or property tax liabilities. Also, failure to extend the ITFA moratorium, which expires on September 30, 2015, could result in additional state and local taxes on broadband services. In addition, U.S. federal, state and local tax laws and regulations are extremely complex and subject to varying interpretations. There can be no assurance that TWC’s tax positions will not be challenged by relevant tax authorities or that TWC would be successful in any such challenge.

Applicable law is subject to change.

The exact requirements of applicable law are not always clear, and the rules affecting TWC’s businesses are always subject to change. For example, the FCC may interpret its rules and regulations in enforcement proceedings in a manner that is inconsistent with the judgments TWC has made. Likewise, regulators and legislators at all levels of government may sometimes change existing rules or establish new rules governing topics such as privacy and information security or environmental protection, including regulations in response to concerns about climate change or cybersecurity, among others. In addition, Congress considers new legislative requirements for cable operators virtually every year, and there is always a risk that such proposals will ultimately be enacted. Federal, state or local governments and/or tax authorities may change tax laws, regulations or administrative practices that could negatively impact TWC’s operating results and financial condition. See “Business—Regulatory Matters.”

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

TWC’s principal physical assets consist of operating plant and equipment, including signal receiving, encoding and decoding devices, two national centers and distribution systems and equipment at or near subscribers’ homes for each of TWC’s cable systems. The signal receiving apparatus typically includes a tower antenna, ancillary electronic equipment, earth stations for reception of satellite signals and terrestrial fiber interconnects. TWC’s distribution system consists primarily of fiber optic and coaxial cables, lasers, routers, switches and related electronic 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 utilities or the distribution cable is buried in underground ducts or trenches. Customer premise equipment consists principally of set-top boxes and cable modems. The physical components of cable systems require periodic maintenance.

TWC’s nationwide backbone consists of fiber owned by TWC or circuits leased from third-party vendors, and related equipment. TWC also operates data centers with equipment that is used to provide services, such as email, news and web services to TWC’s high-speed data subscribers and to provide services to TWC’s voice customers. In addition, TWC maintains a network operations center with equipment necessary to monitor and manage the status of TWC’s high-speed data network.

As of December 31, 2014, TWC leased and owned real property 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; Coudersport, Pennsylvania; Denver, Colorado and Columbus, Ohio, and TWC also leased and owned locations for its corporate offices in New York, New York and Charlotte, North Carolina as well as numerous business offices, warehouses and properties housing regional operations throughout the U.S. TWC’s subsidiary, NaviSite, Inc., leases two locations for its corporate office in Andover, Massachusetts and leases offices and data centers in various cities in the U.S., an office and data centers in the United Kingdom and offices in India. TWC’s signal reception sites, primarily antenna towers and headends, and microwave facilities are located on owned and leased parcels of land, and TWC owns or leases space on the towers on which certain of its equipment is located. TWC owns most of its service vehicles.

TWC believes that its properties, both owned and leased, taken as a whole, are in good operating condition and are suitable and adequate for its business operations.

Item 3. Legal Proceedings.

The legal proceedings information set forth under “Commitments and Contingencies” in Note 18 to the accompanying consolidated financial statements included in this Annual Report on Form 10-K is incorporated herein by reference.

Item 4. Mine Safety Disclosures.

Not applicable.

EXECUTIVE OFFICERS OF THE COMPANY

Pursuant to General Instruction G(3) to Form 10-K, the information regarding the Company’s executive officers required by Item 401(b) of Regulation S-K is hereby included in Part I of this report.

The following table sets forth the name of each executive officer of the Company, the office held by such officer and the age of such officer as of February 13, 2015.


Ellen M. East	53	Executive Vice President and Chief Communications Officer
Dinesh C. Jain	50	Chief Operating Officer
Marc Lawrence-Apfelbaum	59	Executive Vice President, General Counsel and Secretary
Gail G. MacKinnon	52	Executive Vice President and Chief Government Relations Officer
Robert D. Marcus	49	Chairman and Chief Executive Officer
Arthur T. Minson, Jr.	44	Executive Vice President and Chief Financial Officer
Peter C. Stern	43	Executive Vice President and Chief Product, People and Strategy Officer

Set forth below are the principal positions held during at least the last five years by each of the executive officers named above:


Ms. East		Ellen M. East has served as the Company’s Executive Vice President and Chief Communications Officer since October 2007. Prior to that, she served as Vice President of Communications and Public Affairs at Cox Communications Inc., a provider of video, Internet and telephone services, from January 2000 having served in various other positions there from 1993.

Mr. Jain		Dinesh C. Jain has served as the Company’s Chief Operating Officer since January 2014. Mr. Jain has more than 20 years of experience in the U.S. and European cable and telecommunications industries. Most recently, Mr. Jain served as President and Chief Operating Officer 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 from October 2003 and Senior Vice President and Chief Financial Officer from 2002 to October 2003. From 1994 through 2002, he served in a number of roles in sales, marketing, customer service, strategy, corporate development and general management at NTL Incorporated, one of Europe’s leading cable and telecommunications companies. He ultimately served as Deputy Managing Director of NTL’s Consumer Division, overseeing customer and new business growth, as well as the quality of customer satisfaction.

Mr. Lawrence-Apfelbaum		Marc Lawrence-Apfelbaum has served as the Company’s Executive Vice President, General Counsel and Secretary since January 2003. Prior to that, he served as Senior Vice President, General Counsel and Secretary of the Time Warner Cable division of Time Warner Inc. from 1996 and in other positions in the law department prior to that.

Ms. MacKinnon		Gail G. MacKinnon has served as the Company’s Executive Vice President and Chief Government Relations Officer since August 2008. Prior to that, she served as Senior Vice President of Global Public Policy for Time Warner Inc. from January 2007. Prior to joining Time Warner Inc., Ms. MacKinnon served as Senior Vice President for Government Relations at the National Cable and Telecommunications Association, where she managed the cable industry’s outreach to members of Congress and the Executive Branch from January 2006. Prior to that, she served as Vice President of Government Relations at Viacom Inc., an entertainment company, from May 2000 following Viacom Inc.’s merger with CBS Corporation, a radio and television broadcasting company, where she served as Vice President, Federal Relations from 1997.


Mr. Marcus		Robert D. Marcus has served as the Company’s Chairman and Chief Executive Officer since January 2014. Prior to that, Mr. Marcus 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 he had served as Senior Vice President, Mergers and Acquisitions from 2002 and as Vice President of Mergers and Acquisitions from 1998.

Mr. Minson		Arthur T. Minson, Jr. has served as the Company’s Executive Vice President and Chief Financial Officer since May 2013. Prior to joining the Company, Mr. Minson served in a number of senior management roles, including Chief Operating Officer and Chief Financial and Administrative Officer at AOL Inc. (“AOL”), a mass media company, from 2009. From 2007 to 2009, Mr. Minson served as the Company’s Executive Vice President and Deputy Chief Financial Officer, having served as Senior Vice President of Finance from 2006. Prior to that, Mr. Minson was Senior Vice President, Corporate Finance and Development at AOL, where he was responsible for financial planning and analysis, mergers and acquisitions and corporate financial administration. He has also held senior finance positions at AMC Networks (formerly Rainbow Media Holdings, Inc.) and Time Warner Inc.

Mr. Stern		Peter C. Stern has served as the Company’s Executive Vice President and Chief Product, People and Strategy Officer since July 2014. Prior to that, he served as the Company’s Executive Vice President and Chief Strategy, People and Corporate Development Officer from October 2012, after serving as the Company’s Executive Vice President and Chief Strategy Officer from March 2008, the Company’s Executive Vice President of Product Management from 2005 and the Company’s Senior Vice President of Strategic Planning from 2004. Mr. Stern joined the Company from Time Warner Inc. where he had served as Vice President of Strategic Initiatives from 2001.

PART II

Item 5. Market for Registrant’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 two years ended December 31, 2014, see “Quarterly Financial Information” at page 131 herein, which information is incorporated herein by reference. There were approximately 25,000 holders of record of TWC Common Stock as of February 13, 2015.

The Company paid a cash dividend of $0.65 per share of TWC Common Stock in each quarter of 2013, which totaled $758 million during 2013, and paid a cash dividend of $0.75 per share of TWC Common Stock in each quarter of 2014, which totaled $857 million during 2014. On February 12, 2015, the Company’s Board of Directors declared a quarterly cash dividend of $0.75 per share of TWC Common Stock, payable in cash on March 16, 2015 to stockholders of record at the close of business on February 27, 2015. TWC currently expects to pay comparable cash dividends in the future; however, changes in TWC’s dividend program will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Company’s Board of Directors.

Issuer Purchases of Equity Securities

In connection with the Company’s entry into the merger agreement with Comcast Corporation, the Company suspended its common stock repurchase program (the “Stock Repurchase Program”) on February 13, 2014. The Company did not purchase any equity securities registered by the Company pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the quarter ended December 31, 2014 and, as of December 31, 2014, the Company had $2.723 billion remaining under the Stock Repurchase Program authorization.

Item 6. Selected Financial Data.

The selected financial information of TWC as of and for the five years ended December 31, 2014 is set forth at pages 129 through 130 herein and is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information set forth under the caption “Management’s Discussion and Analysis of Results of Operations and Financial Condition” at pages 34 through 66 herein is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The information set forth under the caption “Market Risk Management” at pages 61 through 62 herein is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements of TWC and the report of independent registered public accounting firm thereon set forth at pages 67 through 125 and 127 herein are incorporated herein by reference.

Quarterly Financial Information set forth at page 131 herein is incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

TWC, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of TWC’s “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that TWC’s disclosure controls and procedures are effective to ensure that information required to be disclosed in reports filed or submitted by TWC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that information required to be disclosed by TWC is accumulated and communicated 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 at pages 126 and 128 herein are incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

There have not been any changes in TWC’s internal control over financial reporting during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

PART III


Items 10, 11, 12, 13 and 14.		Directors, Executive Officers and Corporate Governance; Executive Compensation; Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters; Certain Relationships and Related Transactions, and Director Independence; Principal Accounting Fees and Services.

Information called for by Items 10, 11, 12, 13 and 14 of Part III is incorporated by reference from the Company’s definitive Proxy Statement to be filed in connection with its 2015 Annual Meeting of Stockholders pursuant to Regulation 14A, except that (i) the information regarding the Company’s executive officers called for by Item 401(b) of Regulation S-K has been included in Part I of this Annual Report and (ii) the information regarding certain Company equity 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 or any grant of a waiver from a provision of the Code requiring disclosure under applicable SEC rules will also be disclosed on the Company’s website.

Equity Compensation Plan Information

The following table summarizes information as of December 31, 2014 about the Company’s outstanding equity compensation awards and shares of TWC Common Stock reserved for future issuance under the Company’s equity compensation plans.


	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights^(b)	Weighted-average Exercise Price of Outstanding Options, Warrants and Rights^(b)	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (i))^(c)
	(i)	(ii)	(iii)
Equity compensation plans approved by security holders^(a)	10,482,682	$ 75.29	8,723,104
Equity compensation plans not approved by security holders	—	—	—

Total	10,482,682	$ 75.29	8,723,104

^(a)

Equity compensation plans approved by security holders covers the Time Warner Cable Inc. 2011 Stock Incentive Plan (the “2011 Plan”) and the Time Warner Cable Inc. 2006 Stock Incentive Plan, which were approved by the Company’s stockholders in May 2011 and May 2007, respectively. The 2011 Plan is currently the Company’s only compensation plan pursuant to which the Company’s equity is awarded.

^(b)	Column (i) includes 6,264,061 shares of TWC Common Stock underlying outstanding restricted stock units. Because there is no exercise price associated with restricted stock units, such equity awards are not included in the weighted-average exercise price calculation in column (ii).

^(c)

A total of 20,000,000 shares of TWC Common Stock have been authorized for issuance pursuant to the terms of the 2011 Plan. Any shares of TWC Common Stock issued in connection with stock options or stock appreciation rights are counted against the 2011 Plan available share reserve as one share for every share subject to an award. Any shares of TWC Common Stock subject to an award of restricted stock units or other “full-value” awards will be counted against the limit as one share for every one share subject to such award, up to a limit of 9,000,000 shares, above which such shares are deducted from the share authorization at a rate of 3.05 shares for each share subject to such a full value award.

Stock options granted under the 2011 Plan have exercise prices equal to the fair market value of TWC Common Stock at the date of grant. Generally, the stock options vest ratably over a four-year vesting period and expire ten years from the date of grant. Certain stock option awards provide for accelerated vesting upon the grantee’s termination of employment after reaching a specified age and years of service.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1)-(2) Financial Statements and Schedules:

(i) The list of consolidated financial statements set forth in the accompanying Index to Consolidated Financial Statements and Other Financial Information at page 33 herein is incorporated herein by reference. Such consolidated financial statements are filed as part of this Annual Report.

(ii) All financial statement schedules are omitted because the required information is not applicable, or because the information required is included in the consolidated financial statements and notes thereto.

(3) Exhibits:

The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report and such Exhibit 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.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, 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 following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/S/ ROBERT D. MARCUS Robert D. Marcus	Chairman and Chief Executive Officer (principal executive officer)	February 13, 2015

/S/ ARTHUR T. MINSON, JR. Arthur T. Minson, Jr.	Executive Vice President and Chief Financial Officer (principal financial officer)	February 13, 2015

/S/ WILLIAM F. OSBOURN, JR. William F. Osbourn, Jr.	Senior Vice President and Controller (principal accounting officer)	February 13, 2015

/S/ CAROLE BLACK Carole Black	Director	February 13, 2015

/S/ THOMAS H. CASTRO Thomas H. Castro	Director	February 13, 2015

/S/ DAVID C. CHANG David C. Chang	Director	February 13, 2015

/S/ JAMES E. COPELAND, JR. James E. Copeland, Jr.	Director	February 13, 2015

/S/ PETER R. HAJE Peter R. Haje	Director	February 13, 2015

/S/ DONNA A. JAMES Donna A. James	Director	February 13, 2015

/S/ DON LOGAN Don Logan	Director	February 13, 2015

/S/ N.J. NICHOLAS, JR. N.J. Nicholas, Jr.	Director	February 13, 2015

/S/ WAYNE H. PACE Wayne H. Pace	Director	February 13, 2015

/S/ EDWARD D. SHIRLEY Edward D. Shirley	Director	February 13, 2015

/S/ JOHN E. SUNUNU John E. Sununu	Director	February 13, 2015

TIME WARNER CABLE INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND OTHER FINANCIAL INFORMATION


	Page
Management’s Discussion and Analysis of Results of Operations and Financial Condition		34
Consolidated Financial Statements:
Consolidated Balance Sheet		67
Consolidated Statement of Operations		68
Consolidated Statement of Comprehensive Income		69
Consolidated Statement of Cash Flows		70
Consolidated Statement of Equity		71
Notes to Consolidated Financial Statements		72
Management’s Report on Internal Control Over Financial Reporting		126
Reports of Independent Registered Public Accounting Firm		127
Selected Financial Information		129
Quarterly Financial Information		131

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION

INTRODUCTION

Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying consolidated financial statements and provides additional information on Time Warner Cable Inc.’s (together with its subsidiaries, “TWC” or the “Company”) business, any recent developments, financial condition, cash flows and results of operations. MD&A is organized as follows:

•

Overview. This section provides a general description of TWC’s business, as well as any recent developments the Company believes are important in understanding the results of operations and financial condition or in understanding anticipated future trends. This section also provides a summary of how the Company’s operations are presented in the accompanying consolidated financial statements.

•

Results of operations. This section provides an analysis of the Company’s results of operations for the three years ended December 31, 2014. This analysis is presented on both a consolidated and reportable segment basis.

•

Financial condition and liquidity. This section provides an analysis of the Company’s cash flows for the three years ended December 31, 2014, as well as a discussion of the Company’s outstanding debt and commitments as of December 31, 2014. Also included is a discussion of the amount of financial capacity available to fund the Company’s future commitments, as well as a discussion of other financing arrangements.

•

Market risk management. This section discusses how the Company monitors and manages exposure to potential gains and losses arising from changes in market rates and prices, such as interest and foreign currency exchange rates.

•

Critical accounting policies and estimates. This section discusses accounting policies and estimates that require the use of assumptions that were uncertain at the time the estimate was made and that could have a material effect on the Company’s consolidated results of operations or financial condition if there were changes in the estimate or if a different estimate were made. The Company’s significant accounting policies, including those considered to be critical accounting policies and estimates, are summarized in Note 3 to the accompanying consolidated financial statements.

•

Caution concerning forward-looking statements. This section provides a description of the use of forward-looking information appearing in this report, including in MD&A and the consolidated financial statements. Such information is based on management’s current expectations about future events, which are subject to uncertainty and changes in circumstances. Refer to Item 1A, “Risk Factors,” in Part I of this report for a discussion of the risk factors applicable to the Company.

OVERVIEW

TWC is among the largest 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 (including Los Angeles) and Texas. TWC’s mission is to connect its customers to the world—simply, reliably and with superior service. As of December 31, 2014, TWC served approximately 15.2 million residential and business services customers who subscribed to one or more of its video, high-speed data and voice services. During 2014, TWC’s revenue increased 3.1% to approximately $22.8 billion.

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Comcast Merger

Reportable Segments

The Company has three reportable segments: Residential Services, Business Services and Other Operations, which have been determined based on how management evaluates and manages the business. For additional information about the components of each of the Company’s reportable segments, as well as shared functions, refer to “—Financial Statement Presentation—Reportable Segments,” below.

Residential Services Segment

TWC offers video, high-speed data and voice services, as well as security and home management services, to residential customers. As of December 31, 2014, the Company served 14.5 million residential services customers and, during 2014, TWC generated approximately $18.4 billion of revenue from the provision of residential services, which represented 80.9% of TWC’s total revenue.

TWC’s video service provides over 300 channels (including, on average, over 200 high-definition (“HD”) channels) and nearly 20,000 video-on-demand choices, which, increasingly, consumers can watch on the device of their choosing, both inside and outside the home. TWC’s high-speed data service is available in a range of speed (from up to 2 to up to 300 megabits per second (“Mbps”) downstream), 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 throughout the U.S. and to Canada, Puerto Rico and Mexico, among others, and access to popular features in one simple package. TWC’s IntelligentHome service provides state-of-the-art security and home management technology, taking advantage of TWC’s always-on broadband network and around-the-clock security monitoring centers.

Residential Services revenue has benefited from growth in revenue per residential customer relationship (due to an increasing percentage of subscribers purchasing more advanced, higher-priced tiers of service and increases in prices and high-speed data equipment rental charges), offset by lower average residential customer relationships (due primarily to lower residential video subscribers, offset by growth in high-speed data subscribers).

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OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Residential Services programming costs represent a significant portion of the Company’s operating costs and expenses and are expected to continue to increase, reflecting rate increases on existing programming services and the carriage of new networks. TWC expects that its programming costs as a percentage of video revenue will continue to increase, in part due to an increasingly competitive 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 and non-profit institutions; and telecommunications carriers. TWC offers business services at retail and wholesale using its own network infrastructure and third-party infrastructure as required to meet customer needs.

During 2014, revenue from the provision of business services increased 22.8% to $2.8 billion, which represented 12.4% of TWC’s total revenue. The Company expects continued strong growth in Business Services revenue driven by an increase in the number of customers (the result of continued penetration of buildings currently on its network and investment to connect new buildings to its network) and revenue per customer (due to growing product penetration, demand for higher-priced tiers of service and price increases). Given the large opportunity and TWC’s still modest share in business services, the Company has established a target of growing Business Services to exceed $5 billion in annual revenue by 2018.

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 and South Carolina, as well as five other states in the Southeast. Beginning in 2014, the results of DukeNet, which generated revenue of $116 million during 2014, are included in the Business Services segment.

Other Operations Segment

TWC’s Other Operations segment principally consists of (i) Time Warner Cable Media (“TWC Media”), the advertising sales arm of TWC; (ii) beginning in the fourth quarter of 2012, the Company’s regional sports networks that carry Los Angeles Lakers’ basketball games and other sports programming (Time Warner Cable SportsNet and Time Warner Cable Deportes and, collectively, the “Lakers’ RSNs”); (iii) the Company’s local sports, news and lifestyle channels (e.g., Time Warner Cable News NY1); (iv) other operating revenue and costs, including those derived from the Advance/Newhouse Partnership and home shopping network-related services; and (v) beginning in 2014, operating revenue and costs associated with SportsNet LA, discussed below. During 2014, TWC generated revenue from Other Operations of $1.8 billion.

As discussed further below in “—Financial Statement Presentation,” TWC Media sells its video and online advertising inventory to local, regional and national advertising customers and also sells third-party advertising inventory on behalf of other video distributors, including, among others, Verizon Communications Inc.’s (“Verizon”) FiOS, AT&T Inc.’s (“AT&T”) U-verse and Charter. Advertising revenue generated by TWC Media is cyclical, benefiting in years that include political elections as a result of political candidate and issue-related advertising.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

the network. In addition, TWC provides certain production and technical services to American Media Productions. As a result of the launch of SportsNet LA, related revenue, including intersegment revenue, and expenses are included in the Company’s Other Operations segment. The Company continues to seek distribution agreements for the carriage of SportsNet LA by major distributors.

Competition

The operations of each of TWC’s reportable segments face intense competition, both from existing competitors and, as a result of the rapid development of new technologies, services and products, from new entrants.

Residential Services Segment

TWC faces intense competition for residential customers from a variety of alternative communications, information and entertainment delivery sources. TWC competes with incumbent local telephone companies and overbuilders across each of its residential services. Some of these competitors offer a broad range of services with features and functions comparable to those provided by TWC and in bundles similar to those offered by TWC, sometimes including wireless service. Each of TWC’s residential services also faces competition from other companies that provide services on a stand-alone basis. TWC’s residential video service faces competition from direct broadcast satellite services, and increasingly from companies that deliver content to consumers over the Internet. TWC’s residential high-speed data service faces competition from wireless Internet providers and direct 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, networking and voice services face competition from a variety of telecommunications carriers, including incumbent local telephone companies. TWC’s cell tower backhaul service also faces competition from traditional telephone companies as well as other telecommunications carriers, such as metro and regional fiber-based carriers. TWC’s business video service faces competition from direct broadcast satellite providers. TWC also competes with cloud, hosting and related service providers and application-service providers.

Other Operations Segment

TWC faces intense competition in its advertising business across many different platforms and from a wide range of local and national competitors. Competition has increased and will likely continue 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, newspapers, magazines and outdoor advertisers, as well as online advertising companies.

Recent Developments

Common Stock Repurchase Program

In connection with the Company’s entry into the Merger Agreement, the Company suspended its common stock repurchase program (the “Stock Repurchase Program”) on February 13, 2014. From the inception of the Stock Repurchase Program in the fourth quarter of 2010 through February 12, 2014, the Company repurchased 92.9 million shares of TWC common stock at an average price of $83.37 per share, or $7.744 billion in total. As of December 31, 2014, the Company had $2.723 billion remaining under the Stock Repurchase Program authorization.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Financial Statement Presentation

Consolidated

Revenue. The Company generates revenue from each of its reportable segments: Residential Services, Business Services and Other Operations, which includes revenue generated by TWC Media, the Lakers’ RSNs, SportsNet LA and other operating revenue, including amounts derived from the Advance/Newhouse Partnership and home shopping network-related services. Each of the reportable segments is discussed below under “Reportable Segments.”

Operating costs and expenses

Programming and content. Programming and content costs include (i) programming costs for the Residential Services and Business Services segments and (ii) content costs, which include (a) the content acquisition costs associated with the Lakers’ RSNs and (b) other content production costs for the Lakers’ RSNs and the Company’s local sports, news and lifestyle channels. Beginning in 2014, programming and content costs also include the content acquisition and production costs associated with SportsNet LA. Content acquisition costs for the Los Angeles Lakers’ basketball games and Los Angeles Dodgers’ baseball games are recorded as games are exhibited over the applicable season.

Sales and marketing. Sales and marketing costs consist of the costs incurred at the Residential Services, Business Services and Other Operations segments to sell and market the Company’s services. Costs primarily include employee-related and third-party marketing costs (e.g., 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, Business Services and Other Operations segments associated with the installation, repair and maintenance of the Company’s distribution plant. Costs primarily include employee-related costs and materials costs associated with non-capitalizable activities.

Customer care. Customer care costs consist of the costs incurred at the Residential Services and Business Services segments associated with the Company’s customer service activities. Costs primarily include employee-related costs and outsourced customer care costs.

Other operating. Other operating costs consist of all other operating costs incurred at the Residential Services, Business Services and Other Operations segments that are not specifically identified above, including Residential Services and Business Services video franchise and other fees. Other operating costs also include operating costs associated with broad “corporate” functions (e.g., accounting and finance, information technology, executive management, legal and human resources). In addition, other operating costs include functions supporting more than one reportable segment that are centrally managed, including costs associated with facilities (e.g., rent, property taxes and utilities), network operations (e.g., employee costs associated with central engineering activities), vehicles and procurement.

Reportable Segments

The Company’s segment results include intercompany transactions related to programming provided to the Residential Services and Business Services segments by the Lakers’ RSNs, the Company’s local sports, news and lifestyle channels and, beginning in 2014, SportsNet LA. These services are reflected as programming expense for the Residential Services and Business Services segments and as revenue for the Other Operations segment and are eliminated in consolidation. Additionally, the operating costs described above that are associated with broad “corporate” functions or functions supporting more than one reportable segment are recorded as shared functions and are not allocated to the

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

reportable segments. As such, the reportable segment results reflect how management views such segments in assessing financial performance and allocating resources and are not necessarily indicative of the results of operations that each segment would have achieved had they operated as stand-alone entities during the periods presented.

Residential Services Segment

Revenue. Residential Services segment revenue consists of revenue from video, high-speed data, voice and other services offered to residential subscribers. The Company sells video, high-speed data and voice services to residential subscribers separately and in bundled packages at rates lower than if the subscriber purchases each product on an individual basis. Revenue received from subscribers to bundled packages is allocated to each product in a pro-rata manner based on the standalone selling price of each of the respective services.

•

Video. Video revenue includes subscriber fees for the Company’s various tiers or packages of video programming services generally distinguished from one another by the number and type of programming networks they include. Video revenue also includes related equipment rental charges, installation charges, broadcast fees and fees collected on behalf of local franchising authorities and the Federal Communications Commission (the “FCC”). Additionally, video revenue includes revenue from the 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. The Company offers multiple tiers of high-speed data services providing various service speeds, data usage levels and other attributes to meet the different needs of its subscribers. In addition, high-speed data revenue includes fees received from third-party Internet service providers (e.g., Earthlink) whose online services are provided to some of TWC’s customers.

•

Voice. Voice revenue includes subscriber fees for the Company’s voice services, along with related installation charges, as well as fees collected on behalf of governmental authorities.

•

Other. Other revenue includes revenue from security and home management services and other residential subscriber-related fees.

Operating costs and expenses. Residential Services segment operating costs and expenses include the operating costs and expenses that management believes are necessary to assess the performance of and allocate resources to the Residential Services segment. Such costs include programming costs, sales and marketing costs, technical operations costs, customer care costs, video franchise and other fees and other operating costs (e.g., high-speed data connectivity costs, voice network costs and bad debt expense). Employee costs directly attributable to the Residential Services segment are included within each operating cost and expense category as applicable. Operating costs and expenses exclude costs and expenses related to “corporate” functions and functions supporting more than one reportable segment that are centrally managed (e.g., facilities, network operations, vehicles and procurement) and are not within the control of segment management.

Business Services Segment

Revenue. Business Services segment revenue consists of revenue from video, high-speed data, voice, wholesale transport and other services offered to business customers. The Company sells video, high-speed data and voice services to business subscribers separately and in bundled packages, and the revenue is allocated to each product in a pro-rata manner based on the standalone selling price of each of the respective services.

•

Video. Video revenue includes the same fee categories received from business video subscribers as described above under Residential Services video revenue.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

•

High-speed data. High-speed data revenue primarily includes subscriber fees for the Company’s high-speed data services and related installation charges. High-speed data revenue also includes amounts generated by the sale of commercial networking and point-to-point transport services, such as Metro Ethernet services.

•

Voice. Voice revenue includes subscriber fees for the Company’s voice services, along with related installation charges, as well as fees collected on behalf of governmental authorities.

•

Wholesale transport. Wholesale transport revenue primarily includes amounts generated by the sale of point-to-point transport services offered to wireless telephone providers (i.e., cell tower backhaul) and other telecommunications carriers.

•

Other. Other revenue primarily includes revenue from enterprise-class, cloud-enabled hosting, managed applications and services and other business subscriber-related fees.

Operating costs and expenses. Business Services segment operating costs and expenses include the operating costs and expenses that management believes are necessary to assess the performance of and allocate resources to the Business Services segment. Such costs are consistent with the operating costs and expense categories described above under Residential Services operating costs and expenses. Operating costs and expenses exclude costs and expenses related to “corporate” functions and functions supporting more than one reportable segment that are centrally managed (e.g., facilities, network operations, vehicles and procurement) and are not within the control of segment management.

Other Operations Segment

Revenue

•

Advertising. Advertising revenue is generated through TWC Media’s sale of video and online advertising inventory to local, regional and national advertising customers. The Company derives most of its advertising revenue from the sale of advertising inventory on cable networks owned by third parties. The rights to such advertising inventory are acquired by the Company in connection with its agreements to carry such networks or obtained through contractual agreements to sell advertising inventory on behalf of other video distributors (including, among others, Verizon’s FiOS, AT&T’s U-verse and Charter). The Company also generates advertising revenue from the sale of inventory on the Lakers’ RSNs, the Company’s local sports, news and lifestyle channels (e.g., Time Warner Cable News NY1) and, beginning in 2014, SportsNet LA.

•

Other. Other revenue primarily includes (i) beginning in the fourth quarter of 2012, fees received from distributors of the Lakers’ RSNs; (ii) fees paid to TWC (totaling $143 million, $138 million and $135 million in 2014, 2013 and 2012, respectively) primarily by the Advance/Newhouse Partnership for (a) the ability to distribute the 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 of merchandise and carriage fees); and (iv) beginning in 2014, fees received from distributors of SportsNet LA. Other revenue also includes intercompany revenue from the Residential Services and Business Services segments for programming provided by the Lakers’ RSNs, the Company’s local sports, news and lifestyle channels and, beginning in 2014, SportsNet LA.

Operating costs and expenses. Other operating costs and expenses primarily include operating costs associated with TWC Media, the Lakers’ RSNs and the Company’s local sports, news and lifestyle channels and, beginning in 2014, SportsNet LA.

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OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Shared Functions

Operating costs and expenses. Shared functions operating costs and expenses 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 procurement) as well as other activities not attributable to a reportable segment.

Merger-related and restructuring costs. All merger-related and restructuring costs incurred by the Company are recorded as shared functions.

Use of Operating Income before Depreciation and Amortization

In discussing its segment performance, the Company may use certain measures that are not calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). These measures include Operating Income before Depreciation and Amortization (“OIBDA”), which the Company defines as Operating Income before depreciation of tangible assets and amortization of intangible assets. For additional information regarding the use of segment OIBDA, see Note 17 to the accompanying consolidated financial statements.

Recent Accounting Standards

See Note 2 to the accompanying consolidated financial statements for recently issued accounting standards yet to be adopted.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

RESULTS OF OPERATIONS

The following discussion provides an analysis of the Company’s results of operations and should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

Consolidated Results

The consolidated financial results for the Company for 2014, 2013 and 2012 were as follows (in millions):


	Year Ended December 31,									% Change
	2014			2013			2012			2014 vs. 2013			2013 vs. 2012
Revenue:
Residential services	$	18,446		$	18,402		$	18,175			0.2%			1.2%
Business services		2,838			2,312			1,901			22.8%			21.6%
Other		1,528			1,406			1,310			8.7%			7.3%

Total revenue		22,812			22,120			21,386			3.1%			3.4%
Costs and expenses:
Programming and content		5,294			4,950			4,703			6.9%			5.3%
Sales and marketing^(a)		2,192			2,048			1,816			7.0%			12.8%
Technical operations^(a)		1,530			1,500			1,434			2.0%			4.6%
Customer care^(a)		839			766			741			9.5%			3.4%
Other operating^(a)		4,729			4,876			4,868			(3.0%	)		0.2%
Depreciation		3,236			3,155			3,154			2.6%			—
Amortization		135			126			110			7.1%			14.5%
Merger-related and restructuring costs		225			119			115			89.1%			3.5%

Total costs and expenses		18,180			17,540			16,941			3.6%			3.5%

Operating Income		4,632			4,580			4,445			1.1%			3.0%
Interest expense, net		(1,419	)		(1,552	)		(1,606	)		(8.6%	)		(3.4%	)
Other income, net		35			11			497			218.2%			(97.8%	)

Income before income taxes		3,248			3,039			3,336			6.9%			(8.9%	)
Income tax provision		(1,217	)		(1,085	)		(1,177	)		12.2%			(7.8%	)

Net income		2,031			1,954			2,159			3.9%			(9.5%	)
Less: Net income attributable to noncontrolling interests		—			—			(4	)		NM			(100.0%	)

Net income attributable to TWC shareholders	$	2,031		$	1,954		$	2,155			3.9%			(9.3%	)

NM—Not meaningful. ^(a) Amounts include total employee costs, as follows (in millions):

	Year Ended December 31,									% Change
	2014			2013			2012			2014 vs. 2013			2013 vs. 2012
Employee costs	$	4,990		$	4,860		$	4,531			2.7%			7.3%

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Revenue. The increases in revenue for 2014 and 2013 were due to increases in revenue at all segments.

Revenue in 2014 includes $116 million of revenue from DukeNet, which was acquired on December 31, 2013. Compared to 2012, revenue in 2013 includes $183 million (primarily related to the Residential Services segment) as a result of two additional months of revenue from Insight Communications Company, Inc. (“Insight”), which was acquired on February 29, 2012.

Revenue by segment, including the amounts attributable to acquisitions, is discussed in greater detail below in “Segment Results.”

Costs and expenses

Operating costs and expenses. The increase in operating costs and expenses in 2014 was primarily due to increases in the following: programming costs at the Residential Services segment; content costs at the Other 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 segment; partially offset by a decrease in voice costs at the Residential and Business Services segment. For 2014, the growth in operating costs and expenses was reduced by a $124 million decrease in pension expense.

The increase in operating costs and expenses in 2013 was primarily due to increases in the following: programming costs at the Residential Services segment; content costs at the Other Operations segment; sales and marketing costs at the Residential Services and Business Services segments; technical operations costs at the Residential Services segment; costs associated with ad rep agreements at the Other Operations segment; and costs associated with the Company’s shared functions; partially offset by a decrease in other operating costs at the Residential Services segment, primarily as a result of lower voice costs.

Operating costs and expenses by segment are discussed in greater detail below in “Segment Results.”

Depreciation. The increase in depreciation in 2014 was primarily due to growth in shorter-lived capitalized software assets and an increase associated with certain DukeNet assets (acquired on December 31, 2013), partially offset by a decrease associated with certain Insight assets that were fully depreciated as of August 2013.

Depreciation in 2013 was impacted by an increase in shorter-lived distribution system and capitalized software assets as well as two additional months of Insight costs associated with its property, plant and equipment. These increases were offset by a benefit of $160 million associated with (i) certain assets acquired in the July 31, 2006 transactions with Adelphia Communications Corporation and Comcast that were fully depreciated as of July 2012 and (ii) certain Insight assets that were fully depreciated as of August 2013.

Amortization. Amortization increased in 2014 primarily as a result of DukeNet costs associated with its customer relationship intangible assets.

Amortization increased in 2013 primarily as a result of two additional months of Insight costs associated with its customer relationship intangible assets.

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, 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.

The Company incurred restructuring costs of $27 million during 2014 compared to $106 million in 2013 and $61 million in 2012. These restructuring costs were primarily related to employee terminations and other exit costs. The Company expects to incur additional restructuring costs in 2015.

Operating Income. Operating Income increased in 2014 primarily due to growth in revenue, partially offset by higher operating costs and expenses, merger-related and restructuring costs and depreciation, as discussed above. Operating Income increased in 2013 primarily due to growth in revenue, partially offset by increases in operating costs and expenses and amortization, as discussed above.

Interest expense, net. Interest expense, net, decreased in 2014 and 2013 primarily due to lower average fixed-rate debt outstanding during the periods as compared to the prior year.

Other income, net. Other income, net, detail is shown in the table below (in millions):


	Year Ended December 31,
	2014		2013			2012
Income from equity-method investments, net^(a)	$	33	$	19		$	454
Gain (loss) on equity award reimbursement obligation to Time Warner^(b)		1		(10	)		(9	)
Gain on sale of investment in Clearwire Corporation		—		—			64
Other investment losses^(c)		—		—			(12	)
Other		1		2			—

Other income, net	$	35	$	11		$	497

^(a)

Income from equity-method investments, net, in 2012 primarily consists of a pretax gain of $430 million associated with SpectrumCo, LLC’s (“SpectrumCo”) sale of its advanced wireless spectrum licenses to Cellco Partnership (doing business as Verizon Wireless). SpectrumCo was a joint venture between TWC, Comcast and Bright House Networks, LLC.

^(b)	See Note 11 to the accompanying consolidated financial statements for a discussion of the Company’s accounting for its equity award reimbursement obligation to Time Warner Inc. (“Time Warner”).

^(c)	Other investment losses in 2012 represents an impairment of the Company’s investment in Canoe Ventures LLC, an equity-method investee.

Income tax provision. In 2014, 2013 and 2012, the Company recorded income tax provisions of $1.217 billion, $1.085 billion and $1.177 billion, respectively. As discussed above, income before income taxes in 2012 included the SpectrumCo-related gain, which impacted the 2012 income tax provision. The effective tax rates were 37.5%, 35.7% and 35.3% for 2014, 2013 and 2012, respectively.

The income tax provision and effective tax rate for 2014 include a benefit of $24 million as a result of the passage of the New York State budget during the first 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 2013 include (i) a benefit of $77 million (of which $45 million was recorded in the fourth quarter of 2013) primarily related to changes in the tax rate applied to calculate the Company’s net deferred income tax liability as a result of changes to state tax apportionment factors and (ii) a benefit of $27 million resulting from income tax reform legislation enacted in North Carolina, which, along with other changes, phases in a reduction in North Carolina’s corporate income tax rate over several years.

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 income tax liability as a result of an internal reorganization effective on September 30, 2012, (ii) a fourth-quarter benefit of $47 million primarily related to a California state tax law change, (iii) a benefit of $46 million related to the reversal of a valuation allowance against a deferred income tax asset associated with the Company’s investment in Clearwire Corporation (“Clearwire”) and (iv) a charge of $15 million related to the recording of a deferred income tax liability associated with a partnership basis difference.

Absent the impacts of the above items, the effective tax rates would have been 38.2%, 39.1% and 39.5% for 2014, 2013 and 2012, respectively.

Net income attributable to TWC shareholders and net income per common share attributable to TWC common shareholders. Net income attributable to TWC shareholders and net income per common share attributable to TWC common shareholders were as follows for 2014, 2013 and 2012 (in millions, except per share data):


	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013		2013 vs. 2012
Net income attributable to TWC shareholders	$	2,031	$	1,954	$	2,155		3.9%		(9.3%	)

Net income per common share attributable to TWC common shareholders:
Basic	$	7.21	$	6.76	$	6.97		6.7%		(3.0%	)

Diluted	$	7.17	$	6.70	$	6.90		7.0%		(2.9%	)

Net income attributable to TWC shareholders increased in 2014 primarily due to a decrease in interest expense, net, and an increase in Operating Income, partially offset by an increase in income tax provision. Net income per common share attributable to TWC common shareholders for 2014 benefited from lower average common shares outstanding as a result of share repurchases under the Stock Repurchase Program.

Net income attributable to TWC shareholders decreased in 2013 primarily due to the decrease in other income, net (which, as discussed above, included SpectrumCo and Clearwire-related gains in 2012), partially offset by an increase in Operating Income and decreases in income tax provision and interest expense, net. Net income per common share attributable to TWC common shareholders for 2013 benefited from lower average common shares outstanding as a result of share repurchases under the Stock Repurchase Program.

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Segment Results

Residential Services. The financial results of the Residential Services segment for 2014, 2013 and 2012 were as follows (in millions):


	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Revenue:
Video	$	10,002	$	10,481	$	10,917		(4.6%	)		(4.0%	)
High-speed data		6,428		5,822		5,090		10.4%			14.4%
Voice		1,932		2,027		2,104		(4.7%	)		(3.7%	)
Other		84		72		64		16.7%			12.5%

Total revenue		18,446		18,402		18,175		0.2%			1.2%
Operating costs and expenses:
Programming		5,075		4,845		4,652		4.7%			4.1%
Sales and marketing^(a)		1,470		1,396		1,276		5.3%			9.4%
Technical operations^(a)		1,379		1,370		1,313		0.7%			4.3%
Customer care^(a)		705		655		646		7.6%			1.4%
Video franchise and other fees^(b)		464		484		505		(4.1%	)		(4.2%	)
Other^(a)		730		964		1,071		(24.3%	)		(10.0%	)

Total operating costs and expenses		9,823		9,714		9,463		1.1%			2.7%

OIBDA	$	8,623	$	8,688	$	8,712		(0.7%	)		(0.3%	)

^(a) Amounts include total employee costs, as follows (in millions):

	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Employee costs	$	2,743	$	2,633	$	2,498		4.2%			5.4%

^(b)	Video franchise and other fees include fees collected on behalf of franchising authorities and the FCC.

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Selected residential subscriber-related statistics as of December 31, 2014, 2013 and 2012 were as follows (in thousands):


	December 31,						% Change
	2014^(a)		2013		2012		2014 vs. 2013			2013 vs. 2012
Video^(b)		10,789		11,197		12,030		(3.6	%)		(6.9	%)
High-speed data^(c)		11,675		11,089		10,935		5.3	%		1.4	%
Voice^(d)		5,284		4,806		5,024		9.9	%		(4.3	%)

Single play^(e)		5,630		5,660		5,595		(0.5	%)		1.2	%
Double play^(f)		4,525		4,741		4,842		(4.6	%)		(2.1	%)
Triple play^(g)		4,356		3,983		4,237		9.4	%		(6.0	%)

Customer relationships^(h)		14,511		14,384		14,674		0.9	%		(2.0	%)

^(a)

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 subscribers by 19,000, residential double play subscribers by 4,000 and residential customer relationships by 23,000.

^(b)	Video subscriber numbers reflect billable subscribers who purchase at least the basic service video programming tier. The determination of whether a video subscriber is categorized as residential or business is based on the type of subscriber purchasing the service.

^(c)

High-speed data subscriber numbers reflect billable subscribers who purchase any of the high-speed data services offered by TWC. The determination of whether a high-speed data subscriber is categorized as residential or business is generally based upon the type of service provided to that subscriber.

^(d)

Voice subscriber numbers reflect billable subscribers who purchase an IP-based telephony service, as well as, in 2012, a small number of subscribers acquired from Insight who received traditional, circuit-switched telephone service (which was discontinued during the third quarter of 2013). The determination of whether a voice subscriber is categorized as residential or business is generally based upon the type of service provided to that subscriber.

^(e)	Single play subscriber numbers reflect customers who subscribe to one of the Company’s video, high-speed data and voice services.

^(f)	Double play subscriber numbers reflect customers who subscribe to two of the Company’s video, high-speed data and voice services.

^(g)	Triple play subscriber numbers reflect customers who subscribe to all three of the Company’s video, high-speed data and voice services.

^(h)

Customer relationships represent the number of subscribers who purchase at least one of the Company’s video, high-speed data and voice services. For example, a subscriber who purchases only high-speed data service and no video service will count as one customer relationship, and a subscriber who purchases both video and high-speed data services will also count as only one customer relationship.

Revenue. Residential Services segment revenue increased in 2014 compared to 2013 primarily due to an increase in high-speed data revenue, partially offset by decreases in video and voice revenue, each of which is discussed further below. Residential Services segment revenue increased in 2013 compared to 2012 primarily due to an organic increase in high-speed data revenue and two additional months of Insight revenue (which totaled $165 million), partially offset by organic decreases in video and voice revenue, each of which is discussed further below.

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Average monthly revenue per unit for the Residential Services segment for 2014, 2013 and 2012 was as follows:


	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Video^(a)	$	75.85	$	74.90	$	74.64		1.3	%		0.3	%
High-speed data^(b)		46.95		43.92		39.66		6.9	%		10.7	%
Voice^(c)		32.35		34.40		35.68		(6.0	%)		(3.6	%)
Customer relationship^(d)		106.24		105.28		103.57		0.9	%		1.7	%

^(a)	Average monthly residential video revenue per unit represents residential video revenue divided by the corresponding average residential video subscribers for the period.

^(b)	Average monthly residential high-speed data revenue per unit represents residential high-speed data revenue divided by the corresponding average residential high-speed data subscribers for the period.

^(c)	Average monthly residential voice revenue per unit represents residential voice revenue divided by the corresponding average residential voice subscribers for the period.

^(d)	Average monthly residential revenue per residential customer relationship represents residential services revenue divided by the corresponding average residential customer relationships for the period.

Video. The major components of residential video revenue for 2014, 2013 and 2012 were as follows (in millions):


	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Programming tiers^(a)	$	6,497	$	6,825	$	7,170		(4.8	%)		(4.8	%)
Premium networks		811		772		808		5.1	%		(4.5	%)
Transactional video-on-demand		221		259		290		(14.7	%)		(10.7	%)
Video equipment rental and installation charges		1,375		1,444		1,469		(4.8	%)		(1.7	%)
DVR service		634		697		675		(9.0	%)		3.3	%
Franchise and other fees^(b)		464		484		505		(4.1	%)		(4.2	%)

Total	$	10,002	$	10,481	$	10,917		(4.6	%)		(4.0	%)

^(a)	Programming tier revenue includes subscriber fees for the Company’s various tiers or packages of video programming services generally distinguished from one another by the number and type of programming networks they include.

^(b)	Franchise and other fees include fees collected on behalf of franchising authorities and the FCC.

The decrease in residential video revenue in 2014 was primarily due to a decline in video subscribers, partially offset by an increase in average revenue per subscriber. The increase in average revenue per subscriber was primarily the result of price increases and higher premium network revenue (which, for 2013, was reduced by approximately $15 million of subscriber credits issued during the third quarter in connection with a temporary blackout of a premium network resulting from a dispute with a programming vendor), partially offset by lower transactional video-on-demand revenue.

The decrease in residential video revenue in 2013 was primarily due to declines in video subscribers and premium network revenue (which, for 2013, was reduced by approximately $15 million of subscriber credits discussed above) and lower transactional video-on-demand revenue. These decreases were partially offset by price increases and a greater percentage of subscribers purchasing higher-priced tiers of service, as well as two additional months of Insight revenue, which totaled $93 million.

High-speed data. Residential high-speed data revenue increased in 2014 due to growth in average revenue per subscriber and an increase in high-speed data subscribers. The increase in average revenue per subscriber was primarily due to increases in prices and equipment rental charges and a greater percentage of subscribers purchasing higher-priced tiers of service.

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Residential high-speed data revenue increased in 2013 due to growth in average revenue per subscriber and an increase in high-speed data subscribers, as well as two additional months of Insight revenue, which totaled $47 million. The increase in average revenue per subscriber was primarily due to an increase in equipment rental charges and a greater percentage of subscribers purchasing higher-priced tiers of service.

Voice. The decrease in residential voice revenue in 2014 was primarily due to a decrease in average revenue per subscriber, partially offset by growth in voice subscribers.

The decrease in residential voice revenue in 2013 was due to a decline in average revenue per subscriber and fewer voice subscribers, partially offset by two additional months of Insight revenue, which totaled $24 million.

Operating costs and expenses. Operating costs and expenses increased in 2014 primarily due to increases in programming costs, sales and marketing costs and customer care costs, partially offset by a decline in other operating costs.

Operating costs and expenses increased in 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 average monthly costs per subscriber for 2014, 2013 and 2012 were as follows:


	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Programming costs per video subscriber	$	38.49	$	34.63	$	31.81		11.1%			8.9%

Voice costs per voice subscriber	$	4.23	$	7.96	$	9.15		(46.9%	)		(13.0%	)

Programming. The increase in programming costs (which include intercompany expense from the Other Operations segment for programming costs associated with the Lakers’ RSNs, the Company’s local sports, news and lifestyle channels and, beginning in 2014, SportsNet LA) in 2014 was primarily due to contractual rate increases and the carriage of SportsNet LA, partially offset by a decline in video subscribers and lower transactional video-on-demand costs. For 2013, programming costs were reduced by approximately $20 million due to changes in cost estimates for programming services primarily resulting from contract negotiations, changes in programming audit reserves and certain contract settlements.

The increase in programming costs in 2013 was primarily due to contractual rate increases and carriage of new networks (including the Lakers’ RSNs), partially offset by a decline in video subscribers. For 2013 and 2012, programming costs were reduced by approximately $20 million and $40 million, respectively, due to changes in cost estimates for programming services primarily resulting from contract negotiations, changes in programming audit reserves and certain contract settlements.

Sales and marketing. Sales and marketing costs increased in 2014 primarily due to sales and retention headcount growth and higher compensation costs per employee. For the fourth quarter of 2014, this growth was more than offset by decreased marketing expense.

Sales and marketing costs increased in 2013 primarily due to increased headcount and higher compensation costs per employee and also included the impact of increased marketing spending due to temporary blackouts resulting from programming vendor disputes.

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 of which reflected the Company’s continued investments to improve the customer experience.

Technical operations costs increased in 2013 primarily due to higher compensation costs per employee.

Customer care. Customer care costs increased in 2014 primarily due to headcount growth and increased call volume, reflecting the Company’s continued investments to improve the customer experience.

Other operating. Other operating costs decreased in 2014 primarily due to declines in voice costs and bad debt expense. Voice costs decreased $216 million in 2014, primarily due to a decrease in delivery costs per subscriber as a result of the in-sourcing of voice transport, switching and interconnection services from Sprint Corporation (which was completed during the first quarter of 2014).

Other operating costs decreased in 2013 due to declines in a number of categories, including voice costs. Voice costs decreased primarily due to a decrease in delivery costs per subscriber as a result of the in-sourcing of voice transport, switching and interconnection services, as well as a decline in voice subscribers.

OIBDA. OIBDA decreased in 2014 and 2013 primarily due to higher operating costs and expenses, partially offset by the increase in revenue, as discussed above.

Business Services. The financial results of the Business Services segment for 2014, 2013 and 2012 were as follows (in millions):


	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013		2013 vs. 2012
Revenue:
Video	$	365	$	347	$	323		5.2%		7.4%
High-speed data		1,341		1,099		912		22.0%		20.5%
Voice		511		421		306		21.4%		37.6%
Wholesale transport		415		251		184		65.3%		36.4%
Other		206		194		176		6.2%		10.2%

Total revenue		2,838		2,312		1,901		22.8%		21.6%
Operating costs and expenses:
Programming		152		133		119		14.3%		11.8%
Sales and marketing^(a)		515		449		333		14.7%		34.8%
Technical operations^(a)		101		81		72		24.7%		12.5%
Customer care^(a)		134		111		95		20.7%		16.8%
Video franchise and other fees^(b)		16		16		14		—		14.3%
Other^(a)		201		171		146		17.5%		17.1%

Total operating costs and expenses		1,119		961		779		16.4%		23.4%

OIBDA	$	1,719	$	1,351	$	1,122		27.2%		20.4%

^(a) Amounts include total employee costs, as follows (in millions):

	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013		2013 vs. 2012
Employee costs	$	643	$	551	$	427		16.7%		29.0%

^(b)	Video franchise and other fees include fees collected on behalf of franchising authorities and the FCC.

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Selected business subscriber-related statistics as of December 31, 2014, 2013 and 2012 were as follows (in thousands):


	December 31,						% Change
	2014		2013		2012		2014 vs. 2013		2013 vs. 2012
Video^(a)		203		196		188		3.6%		4.3%
High-speed data^(b)		578		517		460		11.8%		12.4%
Voice^(c)		323		275		224		17.5%		22.8%

Single play^(d)		346		327		312		5.8%		4.8%
Double play^(e)		265		230		194		15.2%		18.6%
Triple play^(f)		76		67		57		13.4%		17.5%

Customer relationships^(g)		687		624		563		10.1%		10.8%

^(a)	Video subscriber numbers reflect billable subscribers who purchase at least the basic service video programming tier. The determination of whether a video subscriber is categorized as residential or business is based on the type of subscriber purchasing the service.

^(b)

^(c)	Voice subscriber numbers reflect billable subscribers who purchase an IP-based telephony service. The determination of whether a voice subscriber is categorized as residential or business is generally based upon the type of service provided to that subscriber.

^(d)	Single play subscriber numbers reflect customers who subscribe to one of the Company’s video, high-speed data and voice services.

^(e)	Double play subscriber numbers reflect customers who subscribe to two of the Company’s video, high-speed data and voice services.

^(f)	Triple play subscriber numbers reflect customers who subscribe to all three of the Company’s video, high-speed data and voice services.

^(g)

Revenue. Business Services revenue in 2014 included DukeNet revenue of $116 million (the majority of which is included in wholesale transport). Excluding the impact of DukeNet, Business Services revenue increased in 2014 primarily due to growth in high-speed data and voice subscribers and an increase in cell tower backhaul revenue of $40 million.

Business Services revenue increased in 2013 primarily due to growth in high-speed data and voice subscribers, as well as increases in cell tower backhaul and Metro Ethernet revenue of $44 million and $32 million, respectively, and two additional months of Insight revenue, which totaled $12 million.

Operating costs and expenses. Operating costs and expenses increased in 2014 primarily as a result of increased headcount and higher compensation costs per employee, as well as costs associated with DukeNet. These increases were partially offset by lower voice costs due to the in-sourcing of voice transport, switching and interconnection services.

Operating costs and expenses increased in 2013 primarily as a result of increases in sales and marketing costs, primarily due to increased headcount and higher compensation costs per employee. Operating costs and expenses in 2013 were also impacted by two additional months of Insight costs.

OIBDA. OIBDA increased in 2014 and 2013 primarily due to the increase in revenue, partially offset by higher operating costs and expenses, as discussed above.

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Other Operations. The financial results of the Other Operations segment for 2014, 2013 and 2012 were as follows (in millions):


	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Revenue:
Advertising	$	1,127	$	1,019	$	1,053		10.6%			(3.2%	)
Other		645		583		407		10.6%			43.2%

Total revenue		1,772		1,602		1,460		10.6%			9.7%
Operating costs and expenses^(a)		985		769		614		28.1%			25.2%

OIBDA	$	787	$	833	$	846		(5.5%	)		(1.5%	)

^(a) Amounts include total employee costs, as follows (in millions):

	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Employee costs	$	322	$	320	$	304		0.6%			5.3%

Revenue

Advertising. Advertising revenue increased in 2014 primarily due to growth in political advertising revenue, as well as higher non-political revenue from ad rep agreements. Political advertising revenue was $113 million in 2014 compared to $28 million in 2013. The Company expects advertising revenue in 2015 to decrease compared to 2014 due to a cyclical decline in political advertising revenue.

Advertising revenue decreased in 2013 primarily due to a decline in political advertising ($28 million in 2013 compared to $114 million in 2012), partially offset by growth in non-political advertising revenue (primarily associated with ad rep agreements) and the benefit from two additional months of Insight revenue, which totaled $6 million.

Other. Other revenue increased in 2014 primarily due to affiliate fees from the Residential Services segment as well as other distributors of the Lakers’ RSNs. Other revenue increased in 2013 primarily due to fees from the distribution of the Lakers’ RSNs to third parties, as 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 costs associated with the Lakers’ RSNs and ad rep agreements.

OIBDA. OIBDA decreased in 2014 and 2013 due to an increase in operating costs and expenses, partially offset by higher revenue, as discussed above.

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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 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 procurement) as well as other activities not directly attributable to a reportable segment, for 2014, 2013 and 2012 were as follows (in millions):


	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Operating costs and expenses^(a)	$	2,901	$	2,892	$	2,856		0.3%			1.3%
Merger-related and restructuring costs		225		119		115		89.1%			3.5%

Total costs and expenses	$	3,126	$	3,011	$	2,971		3.8%			1.3%

^(a) Amounts include total employee costs, as follows (in millions):

	Year Ended December 31,						% Change
	2014		2013		2012		2014 vs. 2013			2013 vs. 2012
Employee costs	$	1,282	$	1,356	$	1,302		(5.5%	)		4.1%

Operating costs and expenses. Operating costs and expenses increased slightly in 2014 primarily due to increased maintenance expense, partially offset by lower costs as a result of operating efficiencies, including decreased headcount.

Operating costs and expenses increased in 2013 primarily related to increases in facilities costs and network operations employee costs, primarily due to increased headcount and higher compensation costs per employee, partially offset by lower procurement-related consulting costs. Shared functions employee costs for 2013 also included $10 million of executive severance costs.

Merger-related and restructuring costs. During 2014, the Company incurred merger-related costs of $198 million, which primarily consisted of Comcast merger-related costs, including employee retention costs of $121 million and advisory and legal fees of $74 million. Merger-related costs in 2014 also included $3 million of costs incurred in 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, 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.

FINANCIAL CONDITION AND LIQUIDITY

Management believes that cash generated by or available to TWC should be sufficient to fund its capital and liquidity needs for the next twelve months and for the foreseeable future thereafter, including quarterly dividend payments and maturities of long-term debt. TWC’s sources of cash include cash and equivalents on hand, cash provided by operating activities and borrowing capacity under the Company’s $3.5 billion senior unsecured five-year revolving credit facility (the “Revolving Credit Facility”) and the Company’s $2.5 billion unsecured commercial paper program (which is supported by unused committed capacity under the Revolving Credit Facility), as well as access to capital markets.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

In accordance with the Company’s investment policy of diversifying its investments and limiting the amount of its investments in a single entity or fund, the Company may invest its cash and equivalents in a combination of money market and government funds and U.S. Treasury securities, as well as other similar instruments.

TWC’s unused committed financial capacity was $3.640 billion as of December 31, 2014, reflecting $707 million of cash and equivalents and $2.933 billion of available borrowing capacity under the Revolving Credit Facility.

Current Financial Condition

As of December 31, 2014, the Company had $23.718 billion of debt, $707 million of cash and equivalents (net debt of $23.011 billion, defined as total debt less cash and equivalents) and $8.013 billion of total TWC shareholders’ equity. As of December 31, 2013, the Company had $25.052 billion of debt, $525 million of cash and equivalents (net debt of $24.527 billion) and $6.943 billion of total TWC shareholders’ equity.

The following table shows the significant items contributing to the change in net debt from December 31, 2013 to December 31, 2014 (in millions):


Balance as of December 31, 2013	$	24,527
Cash provided by operating activities		(6,350	)
Capital expenditures		4,097
Dividends paid		857
Repurchases of common stock		259
Proceeds from exercise of stock options		(226	)
Excess tax benefit from equity-based compensation		(141	)
Impact of the change in exchange rates on foreign currency denominated debt^(a)		(124	)
All other, net		112

Balance as of December 31, 2014	$	23,011

^(a)

As discussed further in Note 11 to the accompanying consolidated financial statements, the Company has entered into cross-currency swaps to effectively convert its £1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt.

On February 2, 2015, TWC’s 3.5% senior notes due 2015 matured and all $500 million in aggregate principal amount was repaid.

On February 12, 2015, TWC’s Board of Directors (“TWC’s Board”) declared a quarterly cash dividend of $0.75 per share of TWC common stock, payable in cash on March 16, 2015 to stockholders of record at the close of business on February 27, 2015.

Cash Flows

Cash and equivalents increased $182 million in 2014 and decreased $2.779 billion and $1.873 billion in 2013 and 2012, respectively. Components of these changes are discussed below in more detail.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Operating Activities

Details of cash provided by operating activities are as follows (in millions):


	Year Ended December 31,
	2014			2013			2012
Operating Income	$	4,632		$	4,580		$	4,445
Depreciation		3,236			3,155			3,154
Amortization		135			126			110
Noncash equity-based compensation		182			128			130
Cash paid for interest, net^(a)		(1,435	)		(1,576	)		(1,602	)
Cash paid for income taxes, net^(b)		(352	)		(696	)		(544	)
Pension plan contributions		(5	)		(6	)		(289	)
All other, net, including working capital changes		(43	)		42			121

Cash provided by operating activities	$	6,350		$	5,753		$	5,525

^(a)	Amounts include interest income received (including amounts received under interest rate swap contracts) of $127 million, $164 million and $171 million in 2014, 2013 and 2012, respectively.

^(b)	Amounts include cash refunds of income taxes of $14 million, $2 million and $10 million in 2014, 2013 and 2012, respectively.

Cash provided by operating activities increased from $5.753 billion in 2013 to $6.350 billion in 2014. This increase was primarily related to a decrease in cash paid for income taxes, net, growth in Operating Income (excluding depreciation and amortization) and a decrease in cash paid for interest, net.

Cash paid for income taxes, net, decreased during 2014 primarily as a result of certain capital expenditure-related deductions, including the tangible repair regulations (e.g., de minimus expensing) released in late 2013, which were partially offset by the continued reversal of bonus depreciation benefits recorded in prior years. On December 19, 2014, the Tax Increase Prevention Act of 2014 was enacted, extending bonus depreciation deductions of 50% of the cost of the Company’s qualified 2014 capital expenditures. The Company expects cash paid for income taxes, net, to increase in 2015 primarily as a result of the reversal of prior year bonus depreciation benefits, partially offset by benefits relating to the late enactment of 50% bonus depreciation in December of 2014.

Cash paid for interest, net, decreased during 2014 primarily as a result of the maturity of TWC’s 6.20% senior notes due July 2013 ($1.5 billion in aggregate principal amount), 8.25% senior notes due February 2014 ($750 million in aggregate principal amount) and 7.50% senior notes due April 2014 ($1.0 billion in aggregate principal amount).

The Company made no cash contributions to its qualified defined benefit pension plans (the “qualified pension plans”) and contributed $5 million to its nonqualified defined benefit pension plan (the “nonqualified pension plan” and, together with the qualified pension plans, the “pension plans”) during 2014. As of December 31, 2014, the pension plans were underfunded by $100 million. The Company may make discretionary cash contributions to the qualified pension plans in 2015. 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 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 an increase in Operating Income and decreases in pension plan contributions and cash paid for interest, net, partially offset by an increase in cash paid for income taxes, net, and a change in working capital

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

requirements. Cash paid for income taxes, net, for 2013 was impacted by the extension of 2012 bonus depreciation deductions of 50% of the cost of the Company’s qualified capital expenditures for 2013, which largely offset the Company’s increase in cash paid for income taxes, net, in 2013 from the reversal of bonus depreciation benefits recorded in prior years. Cash paid for income taxes, net, in 2012 benefited from a number of deductions (primarily (i) the usage of Insight’s net operating loss carryforwards, (ii) other Insight-related items, (iii) a taxable loss on the sale of the Clearwire investment and (iv) a tax deduction related to reserves from the formation of an insurance subsidiary in connection with a 2012 internal reorganization, partially offset by the fourth-quarter 2012 income tax payments on the gain on the sale of SpectrumCo’s licenses) that did not recur in 2013 and, as a result, the Company’s cash paid for income taxes, net, increased in 2013 compared to 2012.

Investing Activities

Details of cash used by investing activities are as follows (in millions):


	Year Ended December 31,
	2014			2013			2012
Capital expenditures	$	(4,097	)	$	(3,198	)	$	(3,095	)
Business acquisitions, net of cash acquired:
DukeNet acquisition		—			(423	)		—
Insight acquisition		—			—			(1,339	)
All other		—			—			(1	)
Purchases of investments:
Short-term investments in U.S. Treasury securities		—			(575	)		(150	)
Loan to Sterling Entertainment Enterprises, LLC		—			—			(40	)
All other		(2	)		(13	)		(17	)
Return of capital from investees:
SpectrumCo^(a)		—			7			1,112
Sterling Entertainment Enterprises, LLC^(b)		—			—			88
All other		—			2			—
Proceeds from sale, maturity and collection of investments:
Maturity of short-term investments in U.S. Treasury securities		—			725			—
Proceeds from sale of investment in Clearwire		—			—			64
Repayment of loan to Sterling Entertainment Enterprises, LLC		—			—			40
All other		19			1			—
Acquisition of intangible assets		(39	)		(40	)		(37	)
Other investing activities		27			38			30

Cash used by investing activities	$	(4,092	)	$	(3,476	)	$	(3,345	)

^(a)	2012 amount represents the proceeds from SpectrumCo’s sale of advanced wireless spectrum licenses.

^(b)	Amount represents distributions received from Sterling Entertainment Enterprises, LLC (doing business as SportsNet New York), an equity-method investee.

Cash used by investing activities increased from $3.476 billion in 2013 to $4.092 billion in 2014, principally due to an increase in capital expenditures and the 2013 maturities of short-term investments in U.S. Treasury securities (net of purchases), partially offset by a decrease in business acquisitions, net of cash acquired. The increase in capital expenditures was primarily due to the Company’s investments to improve network reliability, upgrade older customer premise equipment and expand its network to additional residences, commercial buildings and cell towers.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Cash used by investing activities increased from $3.345 billion in 2012 to $3.476 billion in 2013, principally due to a decrease in return of capital from investees and an increase in capital expenditures, partially offset by a decrease in business acquisitions, net of cash acquired, and the maturities of short-term investments in U.S. Treasury securities (net of purchases).

Capital expenditures by major category were as follows (in millions):


	Year Ended December 31,
	2014		2013		2012
Customer premise equipment^(a)	$	1,565	$	1,109	$	1,143
Scalable infrastructure^(b)		1,004		740		748
Line extensions^(c)		695		602		428
Upgrades/rebuilds^(d)		149		114		101
Support capital^(e)		684		633		675

Total capital expenditures	$	4,097	$	3,198	$	3,095

^(a)

Amounts represent costs incurred in the purchase and installation of equipment that resides at a customer’s home or business for the purpose of receiving/sending video, high-speed data and/or voice signals. Such equipment includes 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 to the closest point of the main distribution network.

^(b)

Amounts represent costs incurred in the purchase and installation of equipment that controls signal reception, processing and transmission throughout TWC’s distribution network, as well as controls and communicates with the equipment residing at a customer’s home or business. Also included in scalable infrastructure is certain equipment necessary for content aggregation and distribution (video-on-demand equipment) and equipment necessary to provide certain video, high-speed data and voice service features (voicemail, email, etc.).

^(c)	Amounts represent costs incurred to extend TWC’s distribution network into a geographic area previously not served. These costs typically include network design, the purchase and installation of fiber optic and coaxial cable and certain electronic equipment.

^(d)	Amounts primarily represent costs incurred to upgrade or replace certain existing components or an entire geographic area of TWC’s distribution network. These costs typically include network design, the purchase and installation of fiber optic and coaxial cable and certain electronic equipment.

^(e)

Amounts represent all other capital purchases required to run day-to-day operations. These costs typically include vehicles, land and buildings, computer hardware/software, office equipment, furniture and fixtures, tools and test equipment. Amounts include capitalized software costs of $323 million, $335 million and $296 million in 2014, 2013 and 2012, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Financing Activities

Details of cash used by financing activities are as follows (in millions):


	Year Ended December 31,
	2014			2013			2012
Short-term borrowings, net	$	507		$	—		$	—
Proceeds from issuance of long-term debt		—			—			2,258
Repayments of long-term debt		(1,750	)		(1,500	)		(2,100	)
Repayments of long-term debt assumed in acquisitions		—			(138	)		(1,730	)
Debt issuance costs		—			—			(26	)
Redemption of mandatorily redeemable preferred equity		—			(300	)		—
Dividends paid		(857	)		(758	)		(700	)
Repurchases of common stock		(259	)		(2,509	)		(1,850	)
Proceeds from exercise of stock options		226			138			140
Excess tax benefit from equity-based compensation		141			93			81
Taxes paid in cash in lieu of shares issued for equity-based compensation		(76	)		(68	)		(45	)
Acquisition of noncontrolling interest^(a)		—			—			(32	)
Other financing activities		(8	)		(14	)		(49	)

Cash used by financing activities	$	(2,076	)	$	(5,056	)	$	(4,053	)

^(a)	During the fourth quarter of 2012, TWC acquired the remaining 45.81% noncontrolling interest in Erie Telecommunications, Inc. (“Erie”) for $32 million and, as a result, TWC owns 100% of Erie.

Cash used by financing activities was $2.076 billion in 2014 compared to $5.056 billion in 2013 and $4.053 billion in 2012.

Cash used by financing activities in 2014 primarily consisted of repayments of TWC’s 8.25% senior notes due February 2014 ($750 million in aggregate principal amount) and 7.50% senior notes due April 2014 ($1.0 billion in aggregate principal amount), the payment of quarterly cash dividends and repurchases of TWC common stock (prior to the suspension of the Stock Repurchase Program in connection with the announcement of the Comcast merger), partially offset by borrowings under the Company’s commercial paper program.

Cash used by financing activities in 2013 primarily consisted of repurchases of TWC common stock, the repayment of TWC’s 6.20% senior notes due July 2013, the payment of quarterly cash dividends, the redemption of the mandatorily redeemable non-voting Series A Preferred Equity Membership Units (the “TW NY Cable Preferred Membership Units”) issued by a former subsidiary of TWC, Time Warner NY Cable LLC (“TW NY Cable”), and the repayment of DukeNet’s long-term debt.

Cash used by financing activities in 2012 primarily consisted of the repayments of Time Warner Entertainment Company, L.P.’s (a former subsidiary of TWC) 10.15% senior notes due May 2012 ($250 million in aggregate principal amount), TWC’s 5.40% senior notes due July 2012 ($1.5 billion in aggregate principal amount) and 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 proceeds of public debt issuances in June and August 2012.

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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:


		Interest Rate			Outstanding Balance as of December 31,
	Maturity	Interest Rate			2014		2013
					(in millions)
TWC notes and debentures^(a)	2015-2042		5.762%	^(b)	$	21,065	$	22,938
TWCE debentures^(c)	2023-2033		7.901%	^(b)		2,061		2,065
Revolving credit facility^(d)	2017					—		—
Commercial paper program^(d)	2017		0.437%	^(b)		507		—
Capital leases	2016-2042					85		49

Total debt^(e)					$	23,718	$	25,052

^(a)	Outstanding balance amounts of the TWC notes and debentures as of December 31, 2014 and 2013 each include £1.267 billion of senior unsecured notes valued at $1.973 billion and $2.098 billion, respectively, using the exchange rates at each date.

^(b)	Rate represents a weighted-average effective interest rate as of December 31, 2014 and, for the TWC notes and debentures, includes the effects of interest rate swaps and cross-currency swaps.

^(c)

Outstanding balance amounts of the TWCE debentures as of December 31, 2014 and 2013 include an unamortized fair value adjustment of $61 million and $65 million, respectively, primarily consisting of the fair value adjustment recognized as a result of the 2001 merger of America Online, Inc. (now known as AOL Inc.) and Time Warner Inc. (now known as Historic TW Inc.).

^(d)	As of December 31, 2014, the Company had $2.933 billion of available borrowing capacity under the Revolving Credit Facility (which reflects a reduction of $60 million for outstanding letters of credit backed by the Revolving Credit Facility).

^(e)	Outstanding balance amounts of total debt as of December 31, 2014 and 2013 include current maturities of $1.017 billion and $1.767 billion, respectively.

See Note 9 for further details regarding the Company’s outstanding debt and other financing arrangements, including certain information about maturities, covenants and rating triggers related to such debt and financing arrangements. As of December 31, 2014, TWC was in compliance with the leverage ratio covenant of the Revolving Credit Facility, with a ratio of consolidated total debt as of December 31, 2014 to consolidated EBITDA for 2014 of approximately 2.8 times. In accordance with the Revolving Credit Facility agreement, consolidated total debt as of December 31, 2014 was calculated as (a) total debt per the accompanying consolidated balance sheet less the TWCE unamortized fair value adjustment (discussed above) and the fair value of debt subject to interest rate swaps, less (b) total cash per the accompanying consolidated balance sheet in excess of $25 million. In accordance with the Revolving Credit Facility agreement, consolidated EBITDA for 2014 was calculated as Operating Income plus depreciation, amortization and equity-based compensation expense.

Contractual and Other Obligations

Contractual Obligations

The Company has obligations to make future payments for goods and services under certain contractual arrangements. These contractual obligations secure the future rights to various assets and services to be used in the normal course of the Company’s operations. For example, the Company is contractually committed to make certain minimum lease payments for the use of property under operating lease agreements. In accordance with applicable accounting rules, the future rights and obligations pertaining to firm commitments, such as operating lease obligations and certain purchase obligations under contracts, are not reflected as assets or liabilities in the accompanying consolidated balance sheet.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

The following table summarizes the Company’s aggregate contractual obligations outstanding as of December 31, 2014, and the estimated timing and effect that such obligations are expected to have on the Company’s liquidity and cash flows in future periods (in millions):


	2015		2016-2017		2018-2019		Thereafter		Total
Programming and content purchases^(a)	$	5,221	$	8,959	$	5,890	$	11,636	$	31,706
Outstanding debt obligations^(b)		1,016		2,011		5,257		15,496		23,780
Interest^(c)		1,472		2,867		2,418		13,668		20,425
Operating leases^(d)		162		283		192		293		930
Other^(e)		391		346		104		426		1,267

Total	$	8,262	$	14,466	$	13,861	$	41,519	$	78,108

^(a)

Programming and content purchases represent contracts that the Company has with cable television networks and broadcast stations to provide programming services to its subscribers. The amounts included above represent estimates of 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 amounts due under such contracts may differ from the amounts above based on the actual subscriber numbers and tier placements. These amounts also include programming rights negotiated directly with content owners for distribution on TWC-owned channels or networks and commitments related to TWC’s role as an advertising and distribution sales agent for third party-owned channels or networks.

^(b)	Outstanding debt obligations represent principal amounts due on outstanding debt obligations as of December 31, 2014. Amounts do not include any fair value adjustments, bond premiums, discounts, interest rate derivatives or interest payments.

^(c)

Amounts are based on the outstanding debt balances, respective interest rates and maturity schedule of the respective instruments as of December 31, 2014. Interest ultimately paid on these obligations may differ based on any potential future refinancings entered into by the Company. See Note 9 to the accompanying consolidated financial statements for further details.

^(d)	The Company has lease obligations under various operating leases including minimum lease obligations for real estate and operating equipment.

^(e)

Other represents various other contractual obligations, including amounts associated with data processing services, 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 this obligation cannot be projected with reasonable certainty.

The Company’s total rent expense was $298 million, $257 million and $237 million in 2014, 2013 and 2012, respectively. Included within these amounts are pole attachment rental fees of $79 million, $70 million and $77 million in 2014, 2013 and 2012, respectively.

Minimum pension funding requirements have not been presented in the table above as such amounts have not been determined beyond 2014. The Company made no cash contributions to the qualified pension plans in 2014; however, the Company may make discretionary cash contributions to the qualified pension plans in 2015. For the nonqualified pension plan, the Company contributed $5 million during 2014 and will continue to make contributions in 2015 to the extent benefits are paid.

Contingent Commitments

TWC has cable franchise agreements containing provisions requiring the construction of cable plant and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, TWC obtains surety bonds or letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Such surety bonds and letters of credit totaled $373 million as of both December 31, 2014 and December 31, 2013. Payments under these arrangements are required only in the event of nonperformance. TWC does not expect that these contingent commitments will result in any amounts being paid in the foreseeable future.

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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 December 31, 2014, TWC had fixed-rate debt with an outstanding balance of $23.052 billion and an estimated fair value of $27.842 billion. As discussed below, TWC has entered into interest rate swaps to effectively convert a portion of its fixed-rate debt to variable-rate debt. Based on TWC’s fixed-rate debt obligations outstanding at December 31, 2014, a 25 basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of the fixed-rate debt by approximately $608 million (excluding the impact of such rate changes on the fair value of the interest rate swaps). Such potential increases or decreases are based on certain simplifying assumptions, including a constant level of fixed-rate debt and an immediate, across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period.

Variable-rate Debt

As of December 31, 2014, TWC had an outstanding balance of variable-rate debt of $507 million. Based on TWC’s variable-rate debt obligations outstanding as of December 31, 2014, each 25 basis point increase or decrease in the level of interest rates would, respectively, increase or decrease TWC’s annual interest expense by approximately $1 million. Such potential increases or decreases are based on certain simplifying assumptions, including a constant level of variable-rate debt for all maturities and an immediate, across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period.

Additionally, as discussed below, TWC has entered into interest rate swaps to effectively convert a portion of its fixed-rate debt to variable-rate debt.

Interest Rate Derivative Transactions

The Company is exposed to the market risk of changes in interest rates. To manage the volatility relating to these exposures, the Company’s policy is to maintain a mix of fixed-rate and variable-rate debt by entering into various interest rate derivative transactions to help achieve that mix. Using interest rate swaps, the Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount.

The following table summarizes the terms of the Company’s existing fixed to variable interest rate swaps as of December 31, 2014:


Maturities		2015-2019
Notional amount (in millions)	$	6,100
Weighted-average pay rate (variable based on LIBOR plus variable margins)		4.78%
Weighted-average receive rate (fixed)		6.58%

The notional amounts of interest rate instruments, as presented in the above table, are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. Interest rate swaps represent an integral part of the Company’s interest rate risk management program and resulted in a decrease in interest expense, net, of $116 million in 2014.

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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 aggregate principal amount of fixed-rate British pound sterling denominated debt outstanding. As described further in Note 11 to the accompanying consolidated financial statements, the Company has entered into cross-currency swaps to effectively convert the entire balance of its fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt, hedging the risk that the cash flows related to annual interest payments and the payment of principal at maturity may be adversely affected by fluctuations in currency exchange rates. The gains and losses on the cross-currency swaps offset changes in the fair value of the Company’s fixed-rate British pound sterling denominated debt resulting from changes in exchange rates.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management considers an accounting policy and estimate to be critical if it requires the use of assumptions that were uncertain at the time the estimate was made and if changes in the estimate or selection of a different estimate could have a material effect on the Company’s consolidated results of operations or financial condition. The development and selection of the following critical accounting policies and estimates have been determined by the management of TWC and the related disclosures have been reviewed with the Audit Committee of TWC’s Board. Due to the significant judgment involved in selecting certain of the assumptions used in these areas, it is possible that different parties could choose different assumptions and reach different conclusions. For a summary of all of the Company’s significant accounting policies, see Note 3 to the accompanying consolidated financial statements.

Fair Value Estimates

Derivative Financial Instruments

Derivative financial instruments are used to manage the risks associated with fluctuations in interest rates and foreign currency exchange rates and are recognized in the consolidated balance sheet as either assets or liabilities at fair value. As discussed further in Note 11 to the accompanying consolidated financial statements, changes in the fair value of a derivative financial instrument designated as a fair value hedge (e.g., the Company’s interest rate swaps) are recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. For a derivative financial instrument designated as a cash flow hedge (e.g., the Company’s cross-currency swaps), the effective portion of the gain or loss on the derivative financial instrument is initially reported in equity as a component of accumulated other comprehensive income (loss), net, and subsequently reclassified into earnings when the hedged item (e.g., a forecasted transaction denominated in a foreign currency) affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately.

The fair value of interest rate swaps is determined using a discounted cash flow (“DCF”) analysis based on the terms of the contract. This valuation requires estimates of future interest rates and judgments about the future credit worthiness of the Company and each counterparty over the terms of the contracts. Similarly, the fair value of cross-currency swaps is determined 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.

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 franchise rights) and goodwill are impaired. Under the accounting rules, a qualitative assessment may be performed to determine if an impairment is more likely than not to have occurred. If an impairment is more likely than not to have occurred, then a quantitative assessment is required, which may or may not result in an impairment charge. The determination of whether an impairment is more likely than not to have occurred requires significant judgment regarding potential changes in valuation inputs and includes a review of the Company’s most recent projections, analysis of operating results versus the prior year and budget, changes in market values, changes in discount rates and changes in terminal growth rate assumptions. As discussed further in Note 8 to the accompanying consolidated financial statements, as of the Company’s July 1, 2014 annual testing date and based on its qualitative assessment, the Company determined that it was not more likely than not that its cable franchise rights and goodwill were impaired and, therefore, the Company did not perform a quantitative assessment as part of its annual impairment testing.

Income Taxes

From time to time, transactions occur in which the tax consequences may be subject to uncertainty. Significant judgment is required in assessing and estimating the tax consequences of these transactions. Income tax returns are prepared and filed based on interpretation of tax laws and regulations. In the normal course of business, income tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax, interest and penalty assessments by these taxing authorities. In determining the income tax provision for financial reporting purposes, a reserve for uncertain income tax positions is established unless it is determined that such positions are more likely than not to be sustained upon examination, based on their technical merits. There is considerable judgment involved in determining whether positions taken on the income tax return are more likely than not to be sustained.

Income tax reserve estimates are adjusted periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. The consolidated income tax provision for any given year includes adjustments to prior year income tax accruals that are considered appropriate and any related estimated interest. When applicable, interest and penalties are recognized on uncertain income tax positions as part of the income tax provision. Refer to Note 16 to the accompanying consolidated financial statements for further details.

Legal Contingencies

The Company is subject to legal, regulatory and other proceedings and claims that arise in the ordinary course of business. An estimated liability is recorded for those proceedings and claims arising in the ordinary course of business when the loss from such proceedings and claims becomes probable and reasonably estimable. Outstanding claims are reviewed with internal and external counsel to assess the probability and the estimates of loss, including the possible range of an estimated loss. The risk of loss is reassessed as new information becomes available and liabilities are adjusted as appropriate. The actual cost of resolving a claim may be substantially different from the amount of the liability recorded. Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the consolidated financial position but could possibly be material to the consolidated results of operations or cash flows for any one period.

Pension Plans

TWC sponsors two qualified defined benefit pension plans that provide pension benefits to a majority of the Company’s employees. TWC also provides a nonqualified defined benefit pension plan for certain employees. Pension benefits are based on formulas that reflect the employees’ years of service and compensation during their employment

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

period. The Company recognized pension expense associated with these plans of $81 million, $205 million and $183 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 3 and 14 to the accompanying consolidated financial statements for additional discussion. The determination of these assumptions is discussed in more detail below.

The Company used a discount rate of 5.27% to compute 2014 pension expense, which was determined by the matching of plan liability cash flows to a portfolio of bonds individually selected from a large population of high-quality corporate bonds. A decrease in the discount rate of 25 basis points, from 5.27% to 5.02% while holding all other assumptions constant, would have resulted in an increase in the Company’s pension expense of approximately $15 million in 2014.

The Company’s expected long-term rate of return on plan assets used to compute 2014 pension expense was 7.50%. In developing the expected long-term rate of return on assets, the Company considered the pension portfolio’s composition, past average rate of earnings, discussions with portfolio managers and the Company’s asset allocation targets. A decrease in the expected long-term rate of return of 25 basis points, from 7.50% to 7.25%, while holding all other assumptions constant, would have resulted in an increase in the Company’s pension expense of approximately $8 million in 2014.

The Company used an estimated rate of future compensation increases of 4.75% to compute 2014 pension expense. A decrease in the rate of 25 basis points, from 4.75% to 4.50%, while holding all other assumptions constant, would have resulted in a decrease in the Company’s pension expense of approximately $6 million in 2014.

Programming Agreements

The Company exercises significant judgment in estimating programming expense associated with certain video programming contracts. The Company’s policy is to record programming costs based on the contractual agreements with programming vendors, which are generally multi-year agreements under which payments are made to programming vendors at agreed upon rates based on the number of subscribers to which programming services are provided. If a programming contract expires prior to the entry into a new agreement and the service continues to be distributed, programming costs are estimated during contract negotiations considering previous contractual rates, inflation and the status of the negotiations. When the programming contract terms are finalized, an adjustment to programming expense is recorded, if necessary, to reflect the terms of the new contract. Estimates are also made in the recognition of programming expense related to other items, such as the accounting for free periods and credits from service interruptions, as well as the allocation of consideration exchanged between the parties in multiple-element transactions. Additionally, judgments are also required when multiple services are purchased from the same programming vendor. In these scenarios, the total consideration provided to the programming vendor is allocated to the various services received based upon their respective estimated fair values. Because multiple services from the same programming vendor may be received over different contractual periods and may have different contractual rates, the allocation of consideration to the individual services may have an impact on the timing of expense recognition.

Significant judgment is also involved when the Company enters into agreements that result in the Company receiving cash consideration from the programming vendor, usually in the form of advertising sales, channel positioning fees, launch support or marketing support. In these situations, management must determine based upon facts and circumstances if such cash consideration should be recorded as revenue, a reduction in programming expense or a reduction in another expense category (e.g., marketing).

TIME WARNER CABLE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS

OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Property, Plant and Equipment

TWC incurs expenditures associated with 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 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 are used to capitalize installation activities. Significant judgment is involved in the development of these capitalization standards, including the average time required to perform an installation and the determination of the nature and amount of indirect costs to be capitalized. The capitalization standards are reviewed at least annually and adjusted, if necessary, based on comparisons to actual costs incurred.

Generally, expenditures for tangible fixed assets having a useful life of greater than one year are capitalized. Capitalized costs include direct material, labor and overhead, as well as interest. The costs associated with the repair and maintenance of existing tangible fixed assets are expensed as incurred. Depreciation on these assets is provided using the straight-line method over their estimated useful lives, which are discussed further in Note 3 to the accompanying consolidated financial statements. Significant judgment is involved in the determination of the useful lives of these assets and is based upon an analysis of several factors, such as the physical attributes of the asset, as well as an assessment of the asset’s exposure to future technological obsolescence.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements anticipating future growth in revenue, Operating Income, cash provided by operating activities and other financial measures. Words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are included throughout this report and are based on management’s current expectations and beliefs about future events. As with any projection or forecast, they are subject to uncertainty and changes in circumstances.

The Company operates in a highly competitive, consumer and technology driven and rapidly changing business that is affected by government regulation and economic, strategic, political and social conditions. Various factors could adversely affect the operations, business or financial results of TWC in the future and cause TWC’s actual results to differ materially from those contained in the forward-looking statements, including those factors discussed in detail in Item 1A, “Risk Factors,” in Part I of this report, and in TWC’s other filings made from time to time with the Securities and Exchange Commission after the date of this report. In addition, important factors that could cause the Company’s actual results to differ materially from those in its forward-looking statements include:

•

increased competition from video, high-speed data, networking and voice providers, particularly direct broadcast satellite operators, telecommunications carriers, companies that deliver programming over broadband Internet connections, and wireless broadband and phone providers;

•

the Company’s ability to deal effectively with the current challenging economic environment or further deterioration in the economy, which may negatively impact customers’ demand for the Company’s services and also result in a reduction in the Company’s advertising revenue;

•

the Company’s continued ability to exploit new and existing technologies that appeal to residential and business services customers and advertisers;

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 or regulation and federal, state and local taxation;

•

increased difficulty negotiating programming and retransmission agreements on favorable terms, resulting in increased costs to the Company and/or the loss of popular programming; and

•

changes or delays in, or impediments to executing on, the Company’s plans, initiatives and strategies, including the proposed Comcast merger.

Any forward-looking statements made by the Company in this document speak only as of the date on which they are made. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of changes in circumstances, new information, subsequent events or otherwise.

TIME WARNER CABLE INC.

CONSOLIDATED BALANCE SHEET


	December 31,
	2014			2013
	(in millions)
ASSETS
Current assets:
Cash and equivalents	$	707		$	525
Receivables, less allowances of $109 million and $77 million as of December 31, 2014 and 2013, respectively		949			954
Deferred income tax assets		269			334
Other current assets		391			331

Total current assets		2,316			2,144
Investments		64			56
Property, plant and equipment, net		15,990			15,056
Intangible assets subject to amortization, net		523			552
Intangible assets not subject to amortization		26,012			26,012
Goodwill		3,137			3,196
Other assets		459			1,257

Total assets	$	48,501		$	48,273


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	567		$	565
Deferred revenue and subscriber-related liabilities		198			188
Accrued programming and content expense		902			869
Current maturities of long-term debt		1,017			1,767
Other current liabilities		1,813			1,837

Total current liabilities		4,497			5,226
Long-term debt		22,701			23,285
Deferred income tax liabilities, net		12,560			12,098
Other liabilities		726			717
Commitments and contingencies (Note 18)
TWC shareholders’ equity:
Common stock, $0.01 par value, 280.8 million and 277.9 million shares issued and outstanding as of December 31, 2014 and 2013, respectively		3			3
Additional paid-in capital		7,172			6,951
Retained earnings (accumulated deficit)		1,162			(55	)
Accumulated other comprehensive income (loss), net		(324	)		44

Total TWC shareholders’ equity		8,013			6,943
Noncontrolling interests		4			4

Total equity		8,017			6,947

Total liabilities and equity	$	48,501		$	48,273

See accompanying notes.

TIME WARNER CABLE INC.

CONSOLIDATED STATEMENT OF OPERATIONS


	Year Ended December 31,
	2014			2013			2012
	(in millions, except per share data)
Revenue	$	22,812		$	22,120		$	21,386
Costs and expenses:
Programming and content		5,294			4,950			4,703
Sales and marketing		2,192			2,048			1,816
Technical operations		1,530			1,500			1,434
Customer care		839			766			741
Other operating		4,729			4,876			4,868
Depreciation		3,236			3,155			3,154
Amortization		135			126			110
Merger-related and restructuring costs		225			119			115

Total costs and expenses		18,180			17,540			16,941

Operating Income		4,632			4,580			4,445
Interest expense, net		(1,419	)		(1,552	)		(1,606	)
Other income, net		35			11			497

Income before income taxes		3,248			3,039			3,336
Income tax provision		(1,217	)		(1,085	)		(1,177	)

Net income		2,031			1,954			2,159
Less: Net income attributable to noncontrolling interests		—			—			(4	)

Net income attributable to TWC shareholders	$	2,031		$	1,954		$	2,155

Net income per common share attributable to TWC common shareholders:
Basic	$	7.21		$	6.76		$	6.97

Diluted	$	7.17		$	6.70		$	6.90

Weighted-average common shares outstanding:
Basic		279.3			287.6			307.8

Diluted		283.0			291.7			312.4

Cash dividends declared per share of common stock	$	3.00		$	2.60		$	2.24

See accompanying notes.

TIME WARNER CABLE INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


	Year Ended December 31,
	2014			2013			2012
	(in millions)
Net income	$	2,031		$	1,954		$	2,159
Change in accumulated unrealized losses on pension benefit obligation, net of income tax benefit (provision) of $230 million in 2014, $(377) million in 2013 and $100 million in 2012		(369	)		604			(167	)
Change in accumulated deferred gains (losses) on cash flow hedges, net of income tax provision of $1 million in 2014, $66 million in 2013 and $40 million in 2012		1			104			63
Other changes		—			(1	)		—

Other comprehensive income (loss)		(368	)		707			(104	)

Comprehensive income		1,663			2,661			2,055
Less: Comprehensive income attributable to noncontrolling interests		—			—			(4	)

Comprehensive income attributable to TWC shareholders	$	1,663		$	2,661		$	2,051

See accompanying notes.

TIME WARNER CABLE INC.

CONSOLIDATED STATEMENT OF CASH FLOWS


	Year Ended December 31,
	2014			2013			2012
	(in millions)
OPERATING ACTIVITIES
Net income	$	2,031		$	1,954		$	2,159
Adjustments for noncash and nonoperating items:
Depreciation		3,236			3,155			3,154
Amortization		135			126			110
Income from equity-method investments, net of cash distributions		(13	)		—			(426	)
Pretax gain on sale of investment in Clearwire Corporation		—			—			(64	)
Deferred income taxes		756			363			562
Equity-based compensation expense		182			128			130
Excess tax benefit from equity-based compensation		(141	)		(93	)		(81	)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Receivables		11			(23	)		(63	)
Accounts payable and other liabilities		82			157			(26	)
Other changes		71			(14	)		70

Cash provided by operating activities		6,350			5,753			5,525


INVESTING ACTIVITIES
Capital expenditures		(4,097	)		(3,198	)		(3,095	)
Business acquisitions, net of cash acquired		—			(423	)		(1,340	)
Purchases of investments		(2	)		(588	)		(207	)
Return of capital from investees		—			9			1,200
Proceeds from sale, maturity and collection of investments		19			726			104
Acquisition of intangible assets		(39	)		(40	)		(37	)
Other investing activities		27			38			30

Cash used by investing activities		(4,092	)		(3,476	)		(3,345	)


FINANCING ACTIVITIES
Short-term borrowings, net		507			—			—
Proceeds from issuance of long-term debt		—			—			2,258
Repayments of long-term debt		(1,750	)		(1,500	)		(2,100	)
Repayments of long-term debt assumed in acquisitions		—			(138	)		(1,730	)
Debt issuance costs		—			—			(26	)
Redemption of mandatorily redeemable preferred equity		—			(300	)		—
Dividends paid		(857	)		(758	)		(700	)
Repurchases of common stock		(259	)		(2,509	)		(1,850	)
Proceeds from exercise of stock options		226			138			140
Excess tax benefit from equity-based compensation		141			93			81
Taxes paid in cash in lieu of shares issued for equity-based compensation		(76	)		(68	)		(45	)
Acquisition of noncontrolling interest		—			—			(32	)
Other financing activities		(8	)		(14	)		(49	)

Cash used by financing activities		(2,076	)		(5,056	)		(4,053	)


Increase (decrease) in cash and equivalents		182			(2,779	)		(1,873	)
Cash and equivalents at beginning of year		525			3,304			5,177

Cash and equivalents at end of year	$	707		$	525		$	3,304

See accompanying notes.

TIME WARNER CABLE INC.

CONSOLIDATED STATEMENT OF EQUITY


	Common Stock		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss), Net			Non- controlling Interests			Total Equity
	(in millions)
Balance as of December 31, 2011	$	3	$	8,018		$	68		$	(559	)	$	7		$	7,537
Net income		—		—			2,155			—			4			2,159
Other comprehensive loss		—		—			—			(104	)		—			(104	)
Cash dividends declared ($2.24 per common share)		—		(143	)		(557	)		—			—			(700	)
Repurchase and retirement of common stock		—		(562	)		(1,303	)		—			—			(1,865	)
Equity-based compensation expense		—		130			—			—			—			130
Excess tax benefit realized from equity-based compensation		—		62			—			—			—			62
Shares issued upon exercise of stock options		—		140			—			—			—			140
Taxes paid in lieu of shares issued for equity-based compensation		—		(45	)		—			—			—			(45	)
Acquisition of noncontrolling interest		—		(27	)		—			—			(5	)		(32	)
Other changes		—		3			—			—			(2	)		1

Balance as of December 31, 2012		3		7,576			363			(663	)		4			7,283
Net income		—		—			1,954			—			—			1,954
Other comprehensive income		—		—			—			707			—			707
Cash dividends declared ($2.60 per common share)		—		(305	)		(453	)		—			—			(758	)
Repurchase and retirement of common stock		—		(608	)		(1,918	)		—			—			(2,526	)
Equity-based compensation expense		—		128			—			—			—			128
Excess tax benefit realized from equity-based compensation		—		92			—			—			—			92
Shares issued upon exercise of stock options		—		138			—			—			—			138
Taxes paid in lieu of shares issued for equity-based compensation		—		(68	)		—			—			—			(68	)
Other changes		—		(2	)		(1	)		—			—			(3	)

Balance as of December 31, 2013		3		6,951			(55	)		44			4			6,947
Net income		—		—			2,031			—			—			2,031
Other comprehensive loss		—		—			—			(368	)		—			(368	)
Cash dividends declared ($3.00 per common share)		—		(213	)		(644	)		—			—			(857	)
Repurchase and retirement of common stock		—		(39	)		(169	)		—			—			(208	)
Equity-based compensation expense		—		182			—			—			—			182
Excess tax benefit realized from equity-based compensation		—		141			—			—			—			141
Shares issued upon exercise of stock options		—		226			—			—			—			226
Taxes paid in lieu of shares issued for equity-based compensation		—		(76	)		—			—			—			(76	)
Other changes		—		—			(1	)		—			—			(1	)

Balance as of December 31, 2014	$	3	$	7,172		$	1,162		$	(324	)	$	4		$	8,017

See accompanying notes.

TIME WARNER CABLE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Time Warner Cable Inc. (together with its subsidiaries, “TWC” or the “Company”) is among the largest 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 (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 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 a variety of local, regional and national customers.

On February 12, 2014, the Company entered into an Agreement and Plan of Merger with Comcast Corporation (“Comcast”) whereby the Company agreed to merge with and into a 100% owned subsidiary of Comcast. Refer to Note 4 for further details regarding the merger with Comcast.

On April 25, 2014, Comcast entered into a binding agreement with Charter Communications, Inc. (“Charter”), which contemplates three transactions: (1) a contribution, spin-off and merger transaction, (2) an asset exchange and (3) a sale of assets, all of which are subject to a number of conditions. Refer to Note 4 for further details regarding Comcast’s transactions with Charter.

Basis of Presentation

Basis of Consolidation

The consolidated financial statements include all of the assets, liabilities, revenue, expenses and cash flows of TWC and all entities in which TWC has a controlling voting interest. The consolidated financial statements include the results of the Time Warner Entertainment-Advance/Newhouse Partnership (“TWE-A/N”) only for the TWE-A/N cable systems that are controlled by TWC and for which TWC holds an economic interest. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the consolidated financial statements include accounting for allowances for doubtful accounts, depreciation and amortization, business combinations, derivative financial instruments, pension benefits, equity-based compensation, income taxes, loss contingencies, certain programming arrangements and asset impairments. Allocation methodologies used to prepare the consolidated financial statements are based on estimates and have been described in the notes, where appropriate.

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 comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most recent current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for certain incremental costs of obtaining a contract and costs to fulfill a contract with a customer. Entities have the option of applying either a full retrospective approach to all periods presented or a modified approach that reflects differences prior to the date of adoption as an adjustment to equity. This guidance will be effective for TWC on January 1, 2017 and the Company is currently assessing the impact of this guidance on its consolidated financial statements.

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Equivalents

Cash and equivalents include money market funds, overnight deposits and other investments that are readily convertible into cash and have original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value.

Accounts Receivable

Accounts receivable are recorded at net realizable value. An allowance for doubtful accounts is maintained, which is determined after considering past collection experience, aging of accounts receivable, general economic factors and other considerations. Accounts receivable are written off when it is determined that the balance owed will not be collected, based on the age of the receivable and other considerations. Changes in the allowance for doubtful accounts from January 1 through December 31 are presented below (in millions):


	2014			2013			2012
Balance at beginning of year	$	77		$	65		$	62
Provision for bad debts^(a)		275			249			224
Write-offs, net of recoveries		(243	)		(237	)		(221	)

Balance at end of year	$	109		$	77		$	65

^(a)	Provision for bad debts includes amounts charged to expense associated with the allowance for doubtful accounts and excludes collection expenses and the benefit from late fees billed to subscribers.

Investments

Investments in companies in which TWC has significant influence, but less than a controlling interest, are accounted for using the equity method of accounting. Under the equity method of accounting, only TWC’s investment in and amounts due to and from the equity investee are included in the consolidated balance sheet; only TWC’s share of the investee’s earnings (losses) is included in the consolidated statement of operations; and only the dividends, cash distributions, loans or other cash received from the investee, additional cash investments, loan repayments or other cash paid to the investee are included in the consolidated statement of cash flows.

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Property, Plant and Equipment

Property, plant and equipment are stated at cost, and depreciation on these assets is provided using the straight-line method over their estimated useful lives. 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 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 are used to capitalize installation activities. Significant judgment is involved in the development of these capitalization standards, including the average time required to perform an installation and the determination of the nature and amount of indirect costs to be capitalized. The capitalization standards are reviewed at least annually and adjusted, if necessary, based on comparisons to actual costs incurred. Generally, expenditures for tangible fixed assets having a useful life of greater than one year are capitalized. Capitalized costs include direct material, labor and overhead, as well as interest. The costs associated with the repair and maintenance of existing tangible fixed assets are expensed as incurred.

Property, plant and equipment and related accumulated depreciation as of December 31, 2014 and 2013 consisted of the following:


	December 31,						Estimated Useful Lives
	2014			2013			Estimated Useful Lives
	(in millions)						(in years)
Land, buildings and improvements^(a)	$	2,038		$	1,851			1-20
Distribution systems^(b)		24,951			23,119			3-25
Converters and modems		6,141			5,687			3-5
Capitalized software costs^(c)		2,572			2,252			3-5
Vehicles and other equipment		2,374			2,286			3-10
Construction in progress		476			424

Property, plant and equipment, gross		38,552			35,619
Accumulated depreciation		(22,562	)		(20,563	)

Property, plant and equipment, net	$	15,990		$	15,056

^(a)	Land, buildings and improvements includes $173 million related to land as of December 31, 2014 and 2013, which is not depreciated. The weighted-average useful life for buildings and improvements is approximately 17.59 years.

^(b)	The weighted-average useful life for distribution systems is approximately 13.13 years.

^(c)

Capitalized software costs reflect certain costs incurred for the development of internal use software, including costs associated with coding, software configuration, upgrades and enhancements. These costs, net of accumulated depreciation, totaled $803 million and $801 million as of December 31, 2014 and 2013, respectively. Depreciation of capitalized software costs was $317 million in 2014, $270 million in 2013 and $237 million in 2012.

Intangible Assets and Goodwill

Finite-lived intangible assets consist primarily of customer relationships, cable franchise renewals and access rights. Acquired customer relationships are capitalized and amortized over their estimated useful lives and costs to negotiate and renew cable franchise rights are capitalized and amortized over the term of the new franchise agreement.

Indefinite-lived intangible assets consist of cable franchise rights that are acquired in an acquisition of a business. Goodwill is recorded for the excess of the acquisition cost of an acquired entity over the estimated fair value of the identifiable net assets acquired. Cable franchise rights and goodwill are not amortized.

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Fair Value Estimates

Business Combinations

Upon the acquisition of a business, the fair value of the assets acquired and liabilities assumed must be estimated. This requires judgments regarding the identification of acquired assets and liabilities assumed, some of which may not have been previously recorded by the acquired business, as well as judgments regarding the valuation of all identified acquired assets and assumed liabilities. The assets acquired and liabilities assumed are determined by reviewing the operations, interviewing management and reviewing the financial, contractual and regulatory information of the acquired business. Once the acquired assets and assumed liabilities are identified, the fair values of the assets and liabilities are estimated using a variety of approaches that require significant judgments. For example, intangible assets are typically valued using a discounted cash flow (“DCF”) analysis, which requires estimates of the future cash flows that are attributable to the intangible asset. A DCF analysis also requires significant judgments regarding the selection of discount rates that are intended to reflect the risks that are inherent in the projected cash flows, the determination of terminal growth rates, and judgments about the useful life and pattern of use of the underlying intangible asset. As another example, the valuation of acquired property, plant and equipment requires judgments about current market values, replacement costs, the physical and functional obsolescence of the assets and their remaining useful lives. A failure to appropriately assign fair values to acquired assets and assumed liabilities could significantly impact the amount and timing of future depreciation and amortization expense, as well as significantly overstate or understate assets or liabilities.

Derivative Financial Instruments

Derivative financial instruments are recognized in the consolidated balance sheet as either assets or liabilities at fair value and are designated, if certain conditions are met, as either (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (a “fair value hedge”) or (b) a hedge of the exposure to variable cash flows of a forecasted transaction or a hedge of the foreign currency exposure of a forecasted transaction denominated in a foreign currency (a “cash flow hedge”). For a derivative financial instrument designated as a fair value hedge (e.g., the Company’s interest rate swaps), the gain or loss on the derivative financial instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. As a result, the consolidated statement of operations includes the impact of changes in the fair value of both the derivative financial instrument and the hedged item, which reflects in earnings the extent to which the hedge is ineffective in achieving offsetting changes in fair value. For a derivative financial instrument designated as a cash flow hedge (e.g., the Company’s cross-currency swaps), the effective portion of the gain or loss on the derivative financial instrument is initially reported in equity as a component of accumulated other comprehensive income (loss), net, and subsequently reclassified into earnings when the hedged item (e.g., a forecasted transaction denominated in a foreign currency) affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. Derivative financial instruments are used to manage the risks associated with fluctuations in interest rates and foreign currency exchange rates and are not entered into for speculative or trading purposes.

The fair value of interest rate swaps is determined using a DCF analysis based on the terms of the contract. This valuation requires estimates of future interest rates and judgments about the future credit worthiness of the Company and each counterparty over the terms of the contracts. Similarly, the fair value of cross-currency swaps is determined 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.

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Indefinite-lived Intangible Assets and Goodwill

Long-lived Assets

Long-lived assets (e.g., property, plant and equipment and finite-lived intangible assets) do not require an annual impairment test; instead, long-lived assets are tested for impairment upon the occurrence of a triggering event. Triggering events include the more likely than not disposal of a portion of such assets or the occurrence of an adverse change in the market involving the business employing the related assets. Once a triggering event has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of estimated undiscounted future cash flows generated by the asset group against the carrying value of the asset group. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset would be deemed to be impaired. The impairment charge would then be measured as the difference between the estimated fair value of the asset and its carrying value. Fair value is generally determined by discounting the future cash flows associated with that asset. If the intent is to hold the asset for sale and certain other criteria are met (e.g., the asset can be disposed of currently, appropriate levels of authority have approved the sale, and there is an active program to locate a buyer), the impairment test involves comparing the asset’s carrying value to its estimated fair value. To the extent the carrying value is greater than the asset’s estimated fair value, an impairment charge is recognized for the difference. Significant judgments in this area involve determining whether a triggering event has occurred, determining the future cash flows for the assets involved and selecting the appropriate discount rate to be applied in determining estimated fair value.

Investments

The carrying value of investments accounted for using the equity method of accounting is adjusted downward to reflect any other-than-temporary declines in value. A subjective 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 any, is evaluated. Factors indicative of an other-than-temporary decline include recurring operating losses, credit defaults and subsequent rounds of financing at an amount below the cost basis of the Company’s investment. This list is not all-inclusive and all known quantitative and qualitative factors are weighed in determining if an other-than-temporary decline in value of an investment has occurred. If it has been determined that an investment has sustained an other-than-temporary decline in value, the investment is written down to fair value with a charge to earnings.

Fair Value Measurements

The fair value of an asset or liability is based on the assumptions that market participants would use in pricing the asset or liability. Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. A three-tiered fair value hierarchy is followed when determining the inputs to valuation techniques. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels in order to maximize the use of observable inputs and minimize the use of unobservable inputs. The levels of the fair value hierarchy are as follows:

•

Level 1: consists of financial instruments whose values are based on quoted market prices for identical financial instruments in an active market.

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•

Level 2: consists of financial instruments whose values are determined using models or other valuation methodologies that utilize inputs that are observable either directly or indirectly, including (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) pricing models whose inputs are observable for substantially the full term of the financial instrument and (iv) pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.

•

Level 3: consists of financial instruments whose values are determined using pricing models that utilize significant inputs that are primarily unobservable, DCF methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Pension Plans

TWC sponsors the TWC Pension Plan (as defined in Note 14) and the Union Pension Plan (as defined in Note 14), both qualified defined benefit pension plans, that together provide pension benefits to a majority of the Company’s employees. TWC also provides a nonqualified defined benefit pension plan for certain employees. Pension benefits are based on formulas that reflect the employees’ years of service and compensation during their employment period. 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.

Equity-based Compensation

The cost of employee services received in exchange for an award of equity instruments is measured based on the grant date fair value of the award. The cost of awards not subject to performance-based vesting conditions is recognized on a straight-line basis over the requisite service period and, for awards subject to performance-based vesting conditions deemed probable of being met, the cost is recognized over the requisite service period for each separately vesting tranche of awards. The Black-Scholes model is used to estimate the grant date fair value of a stock option. Because the option-pricing model requires the use of subjective assumptions, changes in these assumptions can materially affect the fair value of stock options granted. The volatility assumption is calculated using the implied volatility of TWC traded options. The expected term, which represents the period of time that options are expected to be outstanding, is estimated based on the historical exercise experience of TWC employees. The risk-free rate assumed in valuing the stock options is based on the U.S. Treasury yield curve in effect at the 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 operating segments. Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision makers in deciding how to allocate resources to an individual operating segment and in assessing performance of the operating segment. The Company classifies its operations into three reportable segments: Residential Services, Business Services and Other Operations. Refer to Note 17 for further details.

Revenue and Costs

Revenue

Revenue consists of the revenue generated by each of the Company’s reportable segments: Residential Services, Business Services and Other Operations.

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Residential Services segment revenue consists of (i) video revenue, including subscriber fees received from residential customers for various tiers or packages of video programming services, related equipment rental charges, installation charges, broadcast fees and fees collected on behalf of local franchising authorities and the Federal Communications Commission, as well as revenue from 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; (iii) voice revenue, including subscriber fees received from residential customers for voice services, along with related installation charges, as well as fees collected on behalf of governmental authorities; and (iv) other revenue, including revenue from security and home management services and other residential subscriber-related fees.

Business Services segment revenue consists of (i) video revenue, including the same fee categories received from business video subscribers as described above under residential video revenue; (ii) high-speed data revenue, including subscriber fees received from business customers for high-speed data services and related installation charges, as well as amounts generated by the sale of commercial networking and point-to-point transport services, such as Metro Ethernet services; (iii) voice revenue, including subscriber fees received from business customers for voice services, along with related installation charges, as well as fees collected on behalf of governmental authorities; (iv) wholesale transport revenue, including amounts generated by the sale of point-to-point transport services offered to wireless telephone providers (i.e., cell tower backhaul) and other telecommunications carriers; and (v) other revenue, including revenue from enterprise-class, cloud-enabled hosting, managed applications and services and other business subscriber-related fees.

Other Operations segment revenue consists of advertising revenue and other revenue. Advertising revenue is generated through the sale of video and online advertising inventory to local, regional and national advertising customers. Other revenue primarily includes (i) beginning in the fourth quarter of 2012, fees received from distributors of the Company’s regional sports networks that carry Los Angeles Lakers’ basketball games and other sports programming (Time Warner Cable SportsNet and Time Warner Cable Deportes); (ii) fees paid to TWC primarily by the Advance/Newhouse Partnership for (a) the ability to distribute the 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 of merchandise and carriage fees); and (iv) beginning in 2014, fees received from distributors of SportsNet LA, discussed below.

On February 25, 2014, American Media Productions, LLC (“American Media Productions”), an unaffiliated third party, launched SportsNet LA, a regional sports network carrying the Los Angeles Dodgers’ baseball games and other sports programming. In accordance with long-term agreements with American Media Productions, TWC acts as the network’s exclusive advertising and affiliate sales agent and has certain branding and programming rights with respect to the network. In addition, TWC provides certain production and technical services to American Media Productions. As a result of the launch of SportsNet LA, related revenue, including intersegment revenue, and expenses are included in the Company’s Other Operations segment.

Revenue Recognition

Residential and business services subscriber fees are recorded as revenue in the period during which the service is provided. Residential and business services revenue received from subscribers who purchase bundled services at a discounted rate is allocated to each product in a pro-rata manner based on the individual product’s selling price (generally, the price at which the product is regularly sold on a standalone basis). Revenue recognition for bundled services is discussed further in “—Multiple-element Transactions—Sales of Multiple Products or Services” below. Installation revenue obtained from traditional cable service connections is recognized as a component of residential and business services revenue when the connections are completed, as installation revenue recognized is less than the related direct selling costs. Advertising revenue is recognized in the period during which the advertisements are exhibited. Fees paid to

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TWC for the ability to distribute TWC’s services are recognized as revenue in the period in which TWC’s services are distributed to a consumer. Fees received for managing certain functions for the Advance/Newhouse Partnership are recognized as revenue ratably over the year, which approximates the period in which management functions are performed. Home shopping network-related revenue is recognized as revenue in the period during which the merchandise is sold or the carriage fees are earned.

In the normal course of business, the Company acts as or uses an intermediary or agent in executing transactions with third parties. The accounting issue presented by these arrangements is whether revenue should be reported based on the gross amount billed to the ultimate customer or on the net amount received from the customer after commissions and other payments to third parties. To the extent revenue is recorded on a gross basis, any commissions or other payments to third parties are recorded as expense so that the net amount (gross revenue less expense) is reflected in operating income. Accordingly, the impact on operating income is the same whether the revenue was recorded on a gross or net basis.

As an example, TWC is assessed franchise fees by franchising authorities, which are passed on to the customer. The accounting issue presented by these arrangements is whether the revenue should be reported based on the gross amount billed to the ultimate customer or on the net amount received from the customer after payments to franchising authorities. In instances where the fees are being assessed directly to the Company, amounts paid to governmental authorities and amounts received from customers are recorded on a gross basis. That is, amounts paid to governmental authorities are recorded as operating costs and expenses and amounts received from 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 costs are recorded as the services are provided. Programming costs are recorded based on the contractual agreements with programming vendors, which are generally multi-year agreements under which payments are made to programming vendors at agreed upon rates based on the number of subscribers to which programming services are provided. If a programming contract expires prior to the entry into a new agreement and the service continues to be distributed, programming costs are estimated during contract negotiations considering previous contractual rates, inflation and the status of the negotiations. When the programming contract terms are finalized, an adjustment to programming expense is recorded, if necessary, to reflect the terms of the new contract. Estimates are also made in the recognition of programming expense related to other items, such as the accounting for free periods and credits from service interruptions, as well as the allocation of consideration exchanged between the parties in multiple-element transactions. Additionally, judgments are also required when multiple services are purchased from the same programming vendor. In these scenarios, the total consideration provided to the programming vendor is allocated to the various services received based upon their respective estimated fair values. Because multiple services from the same programming vendor may be received over different contractual periods and may have different contractual rates, the allocation of consideration to the individual services may have an impact on the timing of expense recognition. Accounting for consideration exchanged between the parties in multiple-element transactions is discussed further in “—Multiple-element Transactions—Contemporaneous Purchases and Sales” below.

Launch fees received from programming vendors are recognized as a reduction of expense on a straight-line basis over the term of the related programming arrangement. Amounts received from programming vendors representing the reimbursement of marketing costs are recognized as a reduction of marketing expense as the marketing services are provided.

Advertising costs are expensed upon the first exhibition of the related advertisements. Marketing expense (including advertising), net of certain reimbursements from programmers, was $684 million in 2014, $676 million in 2013 and $653 million in 2012.

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Multiple-element Transactions

Multiple-element transactions involve situations where judgment must be exercised in determining the fair value of the different elements in a bundled transaction. As the term is used here, multiple-element transactions can involve (i) contemporaneous purchases and sales (e.g., advertising services are sold to a customer and at the same time programming services are purchased) and/or (ii) sales of multiple products and/or services (e.g., video, high-speed data and voice services are sold to a customer).

Contemporaneous Purchases and Sales

In the normal course of business, TWC enters into multiple-element transactions where the Company is simultaneously both a customer and a vendor with the same counterparty. For example, when negotiating the terms of programming purchase contracts with cable networks, the sale of advertising to the same cable network may be negotiated at the same time. Arrangements, although negotiated contemporaneously, may be documented in one or more contracts.

The accounting policy for each transaction negotiated contemporaneously is to record each element of the transaction based on the respective estimated fair values of the products or services purchased and the products or services sold. The judgments made in determining fair value in such transactions impact the amount of revenue, expenses and net income recognized over the respective terms of the transactions, as well as the respective periods in which they are recognized.

In determining the fair value of the respective elements, quoted market prices (where available), historical transactions or comparable cash transactions are considered. The most frequent transactions of this type involve funds received from vendors. Cash consideration received from a vendor is recorded as a reduction in the price of the vendor’s product unless (i) the consideration is for the reimbursement of a specific, incremental, identifiable cost incurred, in which case the cash consideration received would be recorded as a reduction in such cost, or (ii) an identifiable benefit in exchange for the consideration is provided, in which case revenue would be recognized for this element.

With respect to vendor advertising arrangements being negotiated simultaneously with the same cable network, an assessment is performed to determine whether each piece of the arrangement is at fair value. The factors that are considered in determining the individual fair value of the programming vary from arrangement to arrangement and include (i) the existence of a “most-favored-nation” clause or comparable assurances as to fair market value with respect to programming, (ii) a comparison to fees paid under a prior contract and (iii) a comparison to fees paid for similar networks. In determining the fair value of the advertising arrangement, advertising rates paid by other advertisers on the Company’s systems with similar terms are considered.

Sales of Multiple Products 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 than if the subscriber purchases each product on an individual basis. Revenue received from such subscribers is allocated to each product in a pro-rata manner based on the standalone selling price of each of the respective services on an individual basis. As another example, if a subscriber moves from a bundled package containing two services to a bundled package containing three services, the increase in the total revenue received is not attributed to the additional service. Rather, the total revenue received from such subscribers are allocated to each of the three products in a pro-rata manner based on the relative selling price of each of the respective services on an individual basis.

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Income Taxes

Income taxes are provided using the asset and liability method. Under this method, income taxes (i.e., deferred income tax assets, deferred income tax liabilities, taxes currently payable/refunds receivable and tax expense) are recorded based on amounts refundable or payable in the current year and include the results of any difference between GAAP and tax reporting. Deferred income taxes reflect the tax effect of net operating losses, capital losses, general business credit carryforwards and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, based upon enacted tax laws and expected tax rates that will be in effect when the temporary differences reverse. Valuation allowances are established when management determines that it is more likely than not that some portion or the entire deferred tax asset will not be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment.

Legal Contingencies

4.	COMCAST MERGER

On February 12, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Comcast whereby the Company agreed to merge with and into a 100% owned subsidiary of Comcast (the “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 October 9, 2014, respectively, Comcast’s shareholders approved the issuance of Comcast Class A common stock to TWC stockholders in the Comcast merger and TWC stockholders approved the adoption of the Merger Agreement. TWC and Comcast expect to complete the Comcast merger in early 2015, subject to receipt of regulatory approvals, as well as satisfaction of certain other closing conditions.

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On April 25, 2014, Comcast entered into a binding agreement with Charter, which contemplates three transactions (the “divestiture transactions”): (1) a contribution, spin-off and merger transaction, (2) an asset exchange and (3) a sale of assets. The completion of the divestiture transactions will result in the combined company divesting a net total of approximately 3.9 million video subscribers, a portion of which are TWC subscribers (primarily in the Midwest). The divestiture transactions are expected to occur contemporaneously with one another and are conditioned upon and will occur following the closing of the Comcast merger. They are also subject to a number of other conditions. The Comcast merger is not conditioned upon the closing of the divestiture transactions and, accordingly, the Comcast merger can be completed regardless of whether the divestiture transactions are ultimately completed.

5.	EARNINGS PER SHARE

Basic net income per common share attributable to TWC common shareholders is determined using the two-class method and is computed by dividing net income attributable to TWC common shareholders by the weighted average of common shares outstanding during the period. The two-class method is an earnings allocation formula that determines income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Diluted net income per common share attributable to TWC common shareholders reflects the more dilutive earnings per share amount calculated using the treasury stock method or the two-class method.

Set forth below is a reconciliation of net income attributable to TWC common shareholders per basic and diluted common share for the years ended December 31, 2014, 2013 and 2012 (in millions, except per share data):


	Year Ended December 31,
	2014		2013		2012
Net income attributable to TWC common shareholders	$	2,013	$	1,944	$	2,144
Net income allocated to participating securities^(a)		18		10		11

Net income attributable to TWC shareholders	$	2,031	$	1,954	$	2,155


Weighted-average basic common shares outstanding		279.3		287.6		307.8
Dilutive effect of nonparticipating equity awards		1.6		1.9		2.0
Dilutive effect of participating equity awards^(a)		2.1		2.2		2.6

Weighted-average diluted common shares outstanding		283.0		291.7		312.4


Net income per common share attributable to TWC common shareholders:
Basic	$	7.21	$	6.76	$	6.97

Diluted	$	7.17	$	6.70	$	6.90

^(a)	Restricted stock units granted to employees and non-employee directors are considered participating securities with respect to regular quarterly cash dividends.

6.	BUSINESS ACQUISITIONS

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 and South Carolina, as well as five other states in the Southeast, for $572 million in cash (including the repayment of debt), net of cash acquired and capital leases assumed. The financial results for DukeNet, which primarily affect the Business Services segment, have been included in the Company’s

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consolidated financial statements from the date of acquisition and did not significantly impact the Company’s consolidated financial results for the year ended December 31, 2013.

Insight Acquisition

On February 29, 2012, TWC completed its acquisition of Insight Communications Company, Inc. and its subsidiaries (“Insight”) for $1.339 billion in cash, net of cash acquired. At closing, TWC repaid $1.164 billion outstanding under Insight’s senior secured credit facility (including accrued interest), and terminated the facility. Additionally, during 2012, Insight’s $495 million in aggregate principal amount of senior notes due 2018 were redeemed for $579 million in cash (including premiums and accrued interest). The financial results for Insight, which primarily affect the Residential Services and Business Services segments, have been included in the Company’s consolidated financial statements from the date of acquisition and did not significantly impact the Company’s consolidated financial results for the year ended December 31, 2012.

7.	INVESTMENTS

Investments as of December 31, 2014 and 2013 consisted of the following (in millions):


	December 31,
	2014		2013
Equity-method investments^(a)	$	60	$	53
Other investments		4		3

Total investments	$	64	$	56

^(a)

Equity-method investments includes investments 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 distributions in excess of its investment in SportsNet New York and has reflected this amount ($179 million and $185 million as of December 31, 2014 and 2013, respectively) in other liabilities in the consolidated balance sheet.

For the years ended December 31, 2014, 2013 and 2012, the Company recognized income from equity-method investments, net, of $33 million, $19 million and $454 million, respectively, which is included in other income, net, in the consolidated statement of operations.

SpectrumCo

On August 24, 2012, SpectrumCo, LLC (“SpectrumCo”), a joint venture between TWC, Comcast and Bright House Networks, LLC, sold all of its advanced wireless spectrum licenses to Cellco Partnership (doing business as Verizon Wireless), a joint venture between Verizon Communications Inc. and Vodafone Group Plc, for $3.6 billion in cash. Upon closing, TWC, which owned 31.2% of SpectrumCo, received $1.112 billion, which is included in return of capital from investees in the consolidated statement of cash flows for the year ended December 31, 2012, and recorded a pretax gain of $430 million ($261 million on an after-tax basis), which is included in other income, net, in the consolidated statement of operations for the year ended December 31, 2012. The balance of the Company’s investment in SpectrumCo was $8 million as of December 31, 2012, representing TWC’s share of SpectrumCo’s remaining members’ equity (primarily consisting of cash and equivalents, net of accrued expenses). During the first quarter of 2013, the Company received a final return of capital distribution from SpectrumCo of $7 million that, along with losses recognized from the Company’s investment in SpectrumCo, resulted in an investment balance of zero.

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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 Clearwire Communications LLC for shares of Class A common stock of Clearwire. On September 27, 2012, the Company sold these shares of Class A common stock for $64 million in cash. The sale resulted in a pretax gain of $64 million, which is included in other income, net, in the consolidated statement of operations for the year ended December 31, 2012. In addition, during the year ended December 31, 2012, the Company recorded an income tax benefit of $19 million primarily related to the sale of Clearwire’s Class A common stock. The income tax benefit included the reversal of a $46 million valuation allowance against a deferred income tax asset associated with the Company’s investment in Clearwire, which had been established due to the uncertainty of realizing the full benefit of such asset. The Company reversed the valuation allowance as a result of its ability to fully realize the capital losses from the sale of its Clearwire interests by offsetting capital gains related to SpectrumCo’s sale of its spectrum licenses.

8.	INTANGIBLE ASSETS AND GOODWILL

Intangible assets and related accumulated amortization as of December 31, 2014 and 2013 consisted of the following (in millions):


	December 31, 2014							December 31, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Intangible assets subject to amortization:
Customer relationships	$	600	$	(262	)	$	338	$	531	$	(167	)	$	364
Cable franchise renewals and access rights		297		(130	)		167		287		(120	)		167
Other		42		(24	)		18		38		(17	)		21

Total	$	939	$	(416	)	$	523	$	856	$	(304	)	$	552


Intangible assets not subject to amortization:
Cable franchise rights	$	26,934	$	(922	)	$	26,012	$	26,934	$	(922	)	$	26,012

The Company recorded amortization expense of $135 million in 2014, $126 million in 2013 and $110 million in 2012. Based on the remaining carrying value of intangible assets subject to amortization as of December 31, 2014, amortization expense is expected to be $131 million in 2015, $127 million in 2016, $123 million in 2017, $45 million in 2018 and $26 million in 2019. These amounts may vary as acquisitions and dispositions occur in the future.

Changes in the carrying value of goodwill from January 1 through December 31 are presented below (in millions):


	2014			2013
Balance at beginning of year	$	3,196		$	2,889
Acquisition of DukeNet^(a)		(61	)		310
Other changes and adjustments		2			(3	)

Balance at end of year^(b)	$	3,137		$	3,196

^(a)

During the first quarter of 2014, the Company finalized its fair value estimates for certain long-lived assets (e.g., primarily property, plant and equipment and finite-lived intangible assets) acquired in the acquisition of DukeNet resulting in a net $61 million adjustment to goodwill, which was allocated to each reporting unit based upon relative fair value as described below.

^(b)	There were no accumulated goodwill impairment charges as of December 31, 2014 and 2013.

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 the Company has three reporting units (Residential Services, Business Services and TWC Media). The Company reallocated its goodwill to the new reporting units based upon the relative fair value of each reporting unit as of January 1, 2014. The Company determined that the fair value of each of the reporting units was significantly in excess of the respective carrying value.

The estimated fair value of each reporting unit for purposes of re-allocating goodwill was performed using a combination of a DCF analysis and a market-based approach, which utilized significant unobservable inputs (Level 3) within the fair value hierarchy. The inputs used in the DCF analysis included forecasted cash flows under the Company’s most recent long-range projections, discount rates that reflect the risks inherent in each reporting unit and terminal growth rates. The market-based approach imputed the value of the reporting units after considering trading multiples for other publicly traded cable companies, telecommunications providers, and advertisers that are similar to the Company’s reporting units.

In addition, the Company performed a quantitative impairment test of its cable franchise rights resulting in the conclusion that the fair value of these assets were significantly in excess of their carrying value. The quantitative impairment test for cable franchise rights was performed using a DCF analysis. The inputs used in the DCF analysis included forecasted cash flows under the Company’s most recent long-range projections attributable to the cable franchise rights and discount rates that reflect the risks inherent in the cable franchise rights.

As of the Company’s July 1, 2014 annual testing date and based on its qualitative assessment, the Company determined that it was not more likely than not that its cable franchise rights and goodwill were impaired and, therefore, the Company did not perform a quantitative assessment as part of its annual impairment testing. In making that determination, management identified and analyzed qualitative factors, including factors that would most significantly impact a DCF analysis of the fair values of the cable franchise rights and the fair values of the Company’s reporting units. This process included a review of the Company’s most recent projections, analysis of operating results versus the prior year and budget, changes in market values, changes in discount rates and changes in terminal growth rate assumptions.

Goodwill by reportable segment as of December 31, 2014 and 2013 consisted of the following (in millions):


	December 31,
	2014		2013
Residential Services	$	2,259	$	2,305
Business Services		784		798
Other Operations		94		93

Total goodwill	$	3,137	$	3,196

TIME WARNER CABLE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

DEBT

Debt as of December 31, 2014 and 2013 consisted of the following (in millions):


		Outstanding Balance as of December 31,
	Maturity	2014			2013
Senior notes and debentures^(a)	2015-2042	$	23,126		$	25,003
Revolving credit facility	2017		—			—
Commercial paper program	2017		507			—
Capital leases	2016-2042		85			49

Total debt			23,718			25,052
Less: Current maturities^(b)			(1,017	)		(1,767	)

Total long-term debt		$	22,701		$	23,285

^(a)	The weighted-average effective interest rate for the senior notes and debentures as of December 31, 2014 was 5.953% and includes the effects of interest rate swaps and cross-currency swaps.

^(b)	Current maturities as of December 31, 2014 include amounts outstanding under (a) TWC’s 3.5% senior notes due 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					Outstanding Balance as of December 31,
	Issuance	Maturity	Interest Payment	Principal		Outstanding Balance as of December 31,
	Issuance	Maturity	Interest Payment	Principal		2014		2013
8.250% notes	Nov 2008	Feb 2014	Feb/Aug	$	750	$	—	$	752
7.500% notes	Mar 2009	Apr 2014	Apr/Oct		1,000		—		1,006
3.500% notes	Dec 2009	Feb 2015	Feb/Aug		500		501		512
5.850% notes	Apr 2007	May 2017	May/Nov		2,000		2,077		2,111
6.750% notes	June 2008	July 2018	Jan/July		2,000		1,993		1,975
8.750% notes	Nov 2008	Feb 2019	Feb/Aug		1,250		1,242		1,240
8.250% notes	Mar 2009	Apr 2019	Apr/Oct		2,000		1,996		1,969
5.000% notes	Dec 2009	Feb 2020	Feb/Aug		1,500		1,484		1,481
4.125% notes	Nov 2010	Feb 2021	Feb/Aug		700		697		697
4.000% notes	Sep 2011	Sep 2021	Mar/Sep		1,000		994		993
5.750% notes^(a)	May 2011	June 2031	June		974		970		1,032
6.550% debentures	Apr 2007	May 2037	May/Nov		1,500		1,493		1,493
7.300% debentures	June 2008	July 2038	Jan/July		1,500		1,497		1,496
6.750% debentures	June 2009	June 2039	June/Dec		1,500		1,465		1,463
5.875% debentures	Nov 2010	Nov 2040	May/Nov		1,200		1,179		1,179
5.500% debentures	Sep 2011	Sep 2041	Mar/Sep		1,250		1,230		1,230
5.250% notes^(b)	June 2012	July 2042	July		1,012		1,003		1,066
4.500% debentures	Aug 2012	Sep 2042	Mar/Sep		1,250		1,244		1,243

Total^(c)						$	21,065	$	22,938

^(a)	Outstanding balance amounts include £623 million valued at $970 million as of December 31, 2014 and £623 million valued at $1.032 billion as of December 31, 2013 using the exchange rate at each date.

^(b)	Outstanding balance amounts include £644 million valued at $1.003 billion as of December 31, 2014 and £644 million valued at $1.066 billion as of December 31, 2013 using the exchange rate at each date.

^(c)	Outstanding balance amounts as of December 31, 2014 and 2013 include the estimated fair value of net interest rate swap assets of $74 million and $85 million, respectively, and exclude an unamortized discount of $145 million and $158 million, respectively.

TIME WARNER CABLE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

TWC has issued notes and debentures (the “TWC Notes and Debentures”) 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 Mellon, as trustee. The TWC Indenture contains customary covenants relating to restrictions on the ability of the Company or any material subsidiary to create liens and on the ability of the Company and TWCE to consolidate, merge or convey or transfer substantially all of their assets. The TWC Indenture also contains customary events of default.

TWC’s obligations under the TWC Notes and Debentures are guaranteed by TWCE. The TWC Notes and Debentures are unsecured senior obligations of the Company and rank equally with its other unsecured and unsubordinated obligations. Interest on each series of TWC Notes and Debentures is payable semi-annually (with the exception of the British pound sterling denominated notes (the “Sterling Notes”), which is payable annually) in arrears. The guarantees of the TWC Notes and Debentures are unsecured senior obligations of TWCE and rank equally in right of payment with all other unsecured and unsubordinated obligations of TWCE.

The TWC Notes and Debentures may be redeemed in whole or in part at any time at the Company’s option at a redemption price equal to the greater of (i) all of the applicable principal amount being redeemed and (ii) the sum of the present values of the remaining scheduled payments on the applicable TWC Notes and Debentures discounted to the redemption date on a semi-annual basis (with the exception of the Sterling Notes, which are on an annual basis), at a comparable government bond rate plus a designated number of basis points as further described in the TWC Indenture and the applicable note or debenture, plus, in each case, accrued but unpaid interest to, but not including, the redemption date.

The Company may offer to redeem all, but not less than all, of the Sterling Notes in the event of certain changes in the tax laws of the U.S. (or any taxing authority in the U.S.). This redemption would be at a redemption price equal to 100% of the principal amount, together with accrued and unpaid interest on the Sterling Notes to, but not including, the redemption date.

TWCE Debentures

Debentures issued by TWCE as of December 31, 2014 and 2013 consisted of the following (in millions):

Date of

Outstanding Balance
as of December 31,

Issuance

Maturity

Interest
Payment

Principal

2014

2013

8.375% debentures

Mar 1993

Mar 2023

Mar/Sept

1,000

1,022

1,024

8.375% debentures

July 1993

July 2033

Jan/July

1,000

1,039

1,041

Total^(a)

2,061

2,065

^(a)

Outstanding balance amounts as of December 31, 2014 and 2013 include an unamortized fair value adjustment of $61 million and $65 million, respectively, primarily consisting of the fair value adjustment recognized as a result of the 2001 merger of America Online, Inc. (now known as AOL Inc.) and Time Warner Inc. (now known as Historic TW Inc.). The fair value adjustment is amortized over the term of the related debt instrument as a reduction to interest expense.

During 1992 and 1993, Time Warner Entertainment Company L.P. (“TWE”) issued debentures publicly in a number of offerings. As a result of various internal reorganizations, TWCE has assumed all of the rights and obligations under TWE’s previously issued debentures (the “TWCE Debentures”).

TWCE’s obligations under the TWCE Debentures are guaranteed by TWC. The TWCE Debentures were issued pursuant to an indenture, dated as of April 30, 1992, as it has been and may be amended from time to time (the “TWCE Indenture”) by and among TWCE, TWC and The Bank of New York Mellon, as trustee. The TWCE Indenture contains

TIME WARNER CABLE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

customary covenants relating to restrictions on the ability of TWCE or any material subsidiary to create liens and on the ability of TWCE and TWC to consolidate, merge or convey or transfer substantially all of their assets. The TWCE Indenture also contains customary events of default. TWCE has no obligation to file separate reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

The TWCE Debentures are unsecured senior obligations of TWCE and rank equally with its other unsecured and unsubordinated obligations. Interest on each series of TWCE Debentures is payable semi-annually in arrears. The guarantees of the TWCE Debentures are unsecured senior obligations of TWC and rank equally in right of payment with all other unsecured and unsubordinated obligations of TWC. The TWCE Debentures are not redeemable before maturity.

Revolving Credit Facility and Commercial Paper Program

As of December 31, 2014, the Company has a $3.5 billion senior unsecured five-year revolving credit facility maturing in April 2017 (the “Revolving Credit Facility”). The Company’s obligations under the Revolving Credit Facility are guaranteed by TWCE. Borrowings under the Revolving Credit Facility bear interest at a rate based on the credit rating of TWC, which interest rate was LIBOR plus 1.10% per annum as of December 31, 2014. In addition, TWC is required to pay a facility fee on the aggregate commitments under the Revolving Credit Facility at a rate determined by the credit rating of TWC, which rate was 0.15% per annum as of December 31, 2014. The Revolving Credit Facility provides same-day funding capability, and a portion of the aggregate commitments, not to exceed $500 million at any time, may be used for the issuance of letters of credit.

The Revolving Credit Facility contains a maximum leverage ratio covenant of 5.0 times TWC’s consolidated EBITDA. The terms and related financial metrics associated with the leverage ratio are defined in the agreement. As of December 31, 2014, TWC was in compliance with the leverage ratio covenant, calculated in accordance with the agreement, with a ratio of approximately 2.8 times. The Revolving Credit Facility does not contain any credit ratings-based defaults or covenants or any ongoing covenants or representations 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 defined below).

In addition to the Revolving Credit Facility, the Company maintains a $2.5 billion unsecured commercial paper program (the “Commercial Paper Program”) that is also guaranteed by TWCE. Commercial paper issued under the Commercial Paper Program is supported by unused committed capacity under the Revolving Credit Facility and ranks equally with other unsecured senior indebtedness of TWC and TWCE.

As of December 31, 2014, the Company had no borrowings outstanding under the Revolving Credit Facility and had $507 million outstanding under the Commercial Paper Program. TWC’s unused committed financial capacity was $3.640 billion as of December 31, 2014, reflecting $707 million of cash and equivalents and $2.933 billion of available borrowing capacity under the Revolving Credit Facility (which reflects a reduction of $60 million for outstanding letters of credit backed by the Revolving Credit Facility).

Debt Issuance Costs

For the year ended December 31, 2012, the Company capitalized debt issuance costs of $26 million in connection with the Company’s public debt issuances. These capitalized costs are amortized over the term of the related debt instrument and are included as a component of interest expense, net, in the consolidated statement of operations.

TIME WARNER CABLE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Maturities

Annual maturities of debt total $1.016 billion in 2015, $6 million in 2016, $2.005 billion in 2017, $2.003 billion in 2018, $3.254 billion in 2019 and $15.496 billion thereafter.

10.

MANDATORILY REDEEMABLE PREFERRED EQUITY

In connection with the financing of the acquisition of substantially all of the cable assets of Adelphia 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 Preferred Membership Units were redeemed by TW NY Cable as required pursuant to their terms for an aggregate redemption price of $300 million plus accrued dividends. The TW NY Cable Preferred Membership Units paid cash dividends at an annual rate equal to 8.210% of the sum of the liquidation preference thereof on a quarterly basis.

11.

DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair values of assets and liabilities associated with derivative financial instruments recorded in the consolidated balance sheet as of December 31, 2014 and 2013 consisted of the following (in millions):


	Assets				Liabilities
	December 31,				December 31,
	2014		2013		2014		2013
Interest rate swaps^(a)(b)	$	93	$	135	$	19	$	50
Cross-currency swaps^(a)(c)		197		321		—		—
Equity award reimbursement obligation^(d)		—		—		—		11

Total	$	290	$	456	$	19	$	61

^(a)

Interest rate swap and cross-currency swap contracts with multiple counterparties are subject to contractual terms that provide for the net settlement of all such contracts with each counterparty, including cash collateral received or paid, through a single payment in the event of default on or termination of any one contract by either party. The fair values of the assets and liabilities associated with interest rate swaps and cross-currency swaps are presented on a gross basis in the consolidated balance sheet and are classified as current or noncurrent based on the maturity date of the respective contract.

^(b)

Of the total amount of interest rate swap assets recorded as of December 31, 2014 and 2013, $1 million and $8 million, respectively, is recorded in other current assets in the consolidated balance sheet. The total amount of interest rate swap liabilities recorded as of December 31, 2014 and 2013, is recorded in other liabilities in the consolidated balance sheet.

^(c)	The fair values of the assets associated with cross-currency swaps are recorded in other assets in the consolidated balance sheet.

^(d)	The fair value of the equity award reimbursement obligation was recorded in other current liabilities in the consolidated balance sheet as of December 31, 2013.

Fair Value Hedges

The Company uses interest rate swaps to manage interest rate risk by effectively converting fixed-rate debt into variable-rate debt. Under such contracts, the Company is entitled to receive semi-annual interest payments at fixed rates and is required to make semi-annual interest payments at variable rates, without exchange of the underlying principal amount. Such contracts are designated as fair value hedges. The Company recognized no gain or loss related to its interest rate swaps because the changes in the fair values of such instruments were completely offset by the changes in the fair values of the hedged fixed-rate debt. The fair value of interest rate swaps was determined using a DCF analysis based on the terms of the contract and expected forward interest rates, and incorporates the credit risk of the Company and each

TIME WARNER CABLE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

counterparty (a Level 2 fair value measurement). The following table summarizes the terms of existing fixed to variable interest rate swaps as of December 31, 2014 and 2013:


	December 31,
	2014		2013
Maturities		2015-2019		2014-2019
Notional amount (in millions)	$	6,100	$	7,850
Weighted-average pay rate (variable based on LIBOR plus variable margins)		4.78%		4.89%
Weighted-average receive rate (fixed)		6.58%		6.86%

The notional amounts of interest rate instruments, as presented in the above table, are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss.

Cash Flow Hedges

The Company uses cross-currency swaps to manage foreign exchange risk related to foreign currency denominated debt by effectively converting foreign currency denominated debt, including annual interest payments and the payment of principal at maturity, to U.S. dollar denominated debt. Such contracts are designated as cash flow hedges. The Company has entered into cross-currency swaps to effectively convert its £1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. The cross-currency swaps have maturities of June 2031 and July 2042. The fair value of cross-currency swaps was determined using a DCF analysis based on expected forward interest and exchange rates, and incorporates the credit risk of the Company and each counterparty (a Level 2 fair value measurement). The following table summarizes the deferred gain (loss) activity related to cash flow hedges recognized in accumulated other comprehensive income (loss), net, and reclassified into other income, net, for the years ended December 31, 2014, 2013 and 2012 (in millions):


	Year Ended December 31,
	2014			2013			2012
Deferred gains (losses) recognized:
Cross-currency swaps	$	(124	)	$	209		$	179
Deferred (gains) losses reclassified into earnings:
Cross-currency swaps^(a)		126			(39	)		(76	)

Total net deferred gains recognized		2			170			103
Income tax provision		(1	)		(66	)		(40	)

Total net deferred gains recognized, net of tax	$	1		$	104		$	63

^(a)	Deferred gains (losses) on cross-currency swaps were reclassified from accumulated other comprehensive income (loss), net, to other income, net, which offsets the re-measurement gains (losses) recognized in other income, net, on the British pound sterling denominated debt.

Any ineffectiveness 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 with subsidiaries and affiliates of Time Warner, including TWC. Upon the exercise of Time Warner stock options held by TWC employees, TWC was obligated to reimburse Time Warner for the excess of the market price of Time Warner common stock on the day of exercise over the option exercise price (the “intrinsic” value of the award). The Company recorded the equity award reimbursement

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.

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		277.9			297.7			315.0
Shares issued under the equity-based compensation plan		4.4			4.2			4.8
Shares repurchased and retired		(1.5	)		(24.0	)		(22.1	)

Balance at end of year		280.8			277.9			297.7

Common Stock Repurchase Program

In connection with the Company’s entry into the Merger Agreement, the Company suspended its $4.0 billion common stock repurchase program (the “Stock Repurchase Program”) on February 13, 2014. Prior to the suspension, the Company repurchased 1.5 million shares of TWC common stock for $208 million during 2014. As of December 31, 2014, the Company had $2.723 billion remaining under the Stock Repurchase Program authorization.

Common Stock Dividends

TWC’s Board of Directors (“TWC’s Board”) declared quarterly cash dividends per share of TWC common stock in 2014, 2013 and 2012 as follows (in millions, except per share data):


	2014				2013				2012
	Per Share		Amount		Per Share		Amount		Per Share		Amount
First Quarter	$	0.75	$	213	$	0.65	$	195	$	0.56	$	179
Second Quarter		0.75		215		0.65		190		0.56		177
Third Quarter		0.75		214		0.65		188		0.56		173
Fourth Quarter		0.75		215		0.65		185		0.56		171

Total	$	3.00	$	857	$	2.60	$	758	$	2.24	$	700

On February 12, 2015, TWC’s Board declared a quarterly cash dividend of $0.75 per share of TWC common stock, payable in cash on March 16, 2015 to stockholders of record at the close of business on February 27, 2015.

Accumulated Other Comprehensive Income (Loss), Net

Changes in accumulated other comprehensive income (loss), net, included in TWC shareholders’ equity from January 1 through December 31 are presented below (in millions):


	Year Ended December 31,
	2014			2013			2012
Balance at beginning of year	$	44		$	(663	)	$	(559	)
Other comprehensive income (loss) before reclassifications, net of tax		(445	)		686			(90	)
Amounts reclassified into earnings, net of tax		77			21			(14	)

Other comprehensive income (loss), net of tax		(368	)		707			(104	)

Balance at end of year	$	(324	)	$	44		$	(663	)

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
Unrealized losses on pension benefit obligation:
Balance at beginning of year	$	(104	)	$	(708	)	$	(541	)
Other comprehensive income (loss) before reclassifications, net of tax		(368	)		558			(201	)
Amounts reclassified into earnings, net of tax:
Amortization of net actuarial loss (prior service credit)^(a)		(2	)		75			59
Income tax provision (benefit)		1			(29	)		(25	)

Amortization of net actuarial loss (prior service credit), net of tax		(1	)		46			34

Other comprehensive income (loss), net of tax		(369	)		604			(167	)

Balance at end of year	$	(473	)	$	(104	)	$	(708	)


Deferred gains (losses) on cash flow hedges:
Balance at beginning of year	$	149		$	45		$	(18	)
Other comprehensive income (loss) before reclassifications, net of tax		(77	)		129			111
Amounts reclassified into earnings, net of tax:
Effective portion of (gain) loss on cash flow hedges^(b)		126			(39	)		(76	)
Income tax provision (benefit)		(48	)		14			28

Effective portion of (gain) loss on cash flow hedges, net of tax		78			(25	)		(48	)

Other comprehensive income (loss), net of tax		1			104			63

Balance at end of year	$	150		$	149		$	45


Other changes:
Balance at beginning of year	$	(1	)	$	—		$	—
Other comprehensive loss before reclassifications, net of tax		—			(1	)		—
Amounts reclassified into earnings, net of tax		—			—			—

Other comprehensive loss, net of tax		—			(1	)		—

Balance at end of year	$	(1	)	$	(1	)	$	—

^(a)	Amounts are included in the computation of net periodic benefit costs as discussed further in Note 14.

^(b)	Amounts are recorded in other income, net in the consolidated statement of operations as discussed further in Note 11.

13.

EQUITY-BASED COMPENSATION

TWC is authorized, under the Company’s stock incentive plan (the “2011 Plan”) to grant restricted stock units (“RSUs”) and options to purchase shares of TWC common stock to its employees and non-employee directors. As of December 31, 2014, the 2011 Plan provides for the issuance of up to 20.0 million shares of TWC common stock, of which 8.7 million shares were available for grant.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Equity-based compensation expense and the related income tax benefit recognized for the years ended December 31, 2014, 2013 and 2012 was as follows (in millions):


	Year Ended December 31,
	2014		2013		2012
Equity-based compensation expense recognized:
Restricted stock units^(a)	$	160	$	89	$	85
Stock options		22		39		45

Total equity-based compensation expense^(a)	$	182	$	128	$	130


Income tax benefit recognized	$	71	$	49	$	51

^(a)	Amounts in 2014 include $56 million of equity-based compensation expense recognized in merger-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:


	Number of Units			Weighted- Average Grant Date Value
	(in millions)
Unvested as of December 31, 2013		4.086		$	72.42
Granted		3.807			135.81
Vested		(1.416	)		61.65
Forfeited		(0.213	)		111.16

Unvested as of December 31, 2014		6.264			112.06

For the year ended December 31, 2014, TWC granted 3.807 million RSUs at a weighted-average grant date fair value of $135.81 per RSU, which included 143,000 RSUs subject to performance-based vesting conditions (“PBUs”) at a weighted-average grant date fair value of $135.31 per PBU. For the year ended December 31, 2013, TWC granted 1.200 million RSUs at a weighted-average grant date fair value of $87.30 per RSU, which included 142,000 PBUs at a weighted-average grant date fair value of $87.31 per PBU. For the year ended December 31, 2012, TWC granted 1.442 million RSUs at a weighted-average grant date fair value of $77.09 per RSU, which included 196,000 PBUs at a weighted-average grant date fair value of $77.13 per PBU.

The fair value of RSUs that vested during the year was $87 million in 2014, $98 million in 2013 and $95 million in 2012. As of December 31, 2014, the aggregate intrinsic value of unvested RSUs was $953 million. Total unrecognized compensation cost related to unvested RSUs as of December 31, 2014, without taking into account expected forfeitures, was $462 million, which the Company expects to recognize over a weighted-average period of 3.69 years, without taking into account acceleration of vesting.

As a result of the planned Comcast merger, the Company advanced the timing of its annual grants that would have been made in 2015 and 2016 into 2014. As a result, eligible employees were granted additional RSUs having a value equal to (and with vesting terms consistent with) those that these employees otherwise would have received in each of 2015 and 2016 (the “retention grants”), but without performance-based vesting conditions. Specifically, the retention grant corresponding to the 2015 annual grant will vest 50% in February of 2018 and 50% in February of 2019; the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

retention grant corresponding to the 2016 annual grant will vest 50% in February of 2019 and 50% in February of 2020, in each case subject to continued employment. Like the Company’s other equity awards, if a grantee’s employment is terminated without cause or for good reason within 24 months following the closing of the Comcast merger, the retention grants will vest in full. However, if the merger has not yet closed and the grantee’s employment is terminated prior to the date on which either retention grant would have normally been made (i.e., February 2015 or 2016, as appropriate), such retention grant will be forfeited. Employees who received retention grants will generally not be eligible for additional equity awards in 2015 or 2016. Consequently, absent the closing of the Comcast merger, both the employees and the Company would generally be in the same position they would have been in had the additional RSUs been granted in 2015 and 2016, rather than in 2014.

With the exception of the retention grants discussed above, RSUs, including PBUs, generally vest 50% on each of the third and fourth anniversary of the grant date, subject to continued employment and, in the case of PBUs, subject to the satisfaction and certification of the applicable performance conditions. RSUs generally provide for accelerated vesting upon the termination of the grantee’s employment after reaching a specified age and years of service or upon certain terminations of the grantee’s employment within 24 months following the closing of the Comcast merger and, in the case of PBUs, subject to the satisfaction and certification of the applicable performance conditions. PBUs are subject to forfeiture if the applicable performance condition is not satisfied. RSUs awarded to non-employee directors are not subject to vesting or forfeiture restrictions and the shares underlying the RSUs will generally be issued in connection with a director’s termination of service as a director. Pursuant to the directors’ compensation program, certain directors with more than three years of service on TWC’s Board have elected an in-service vesting period for their RSU awards. Holders of RSUs are generally entitled to receive cash dividend equivalents or retained distributions related to regular cash dividends or other distributions, respectively, paid by TWC. In the case of PBUs, the receipt of the dividend equivalents is subject to the satisfaction and certification of the applicable performance conditions. Retained distributions are subject to the vesting requirements of the underlying RSUs. Upon the vesting of a RSU, shares of TWC common stock may be issued from authorized but unissued shares or from treasury stock, if any.

Stock Options

The following table summarizes information about stock options that were outstanding as of December 31, 2014:


	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in millions)					(in years)		(in millions)
Outstanding as of December 31, 2013		7.991		$	70.58
Exercised		(3.658	)		64.91
Forfeited or expired		(0.114	)		78.05

Outstanding as of December 31, 2014		4.219			75.29		6.71	$	324

Exercisable as of December 31, 2014		1.372			61.38		5.02		124

Expected to vest as of December 31, 2014		2.775			81.91		7.52		195

For the year ended December 31, 2014, TWC granted no stock options. For the year ended December 31, 2013, TWC granted 2.539 million stock options at a weighted-average grant date fair value of $15.66 per option, which included 302,000 stock options subject to performance-based vesting conditions (“PBOs”) at a weighted-average grant date fair value of $15.57 per PBO. For the year ended December 31, 2012, TWC granted 3.017 million stock options at a weighted-average grant date fair value of $16.85 per option, which included 372,000 PBOs at a weighted-average grant date fair value of $16.85 per PBO.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The total intrinsic value of stock options exercised during the year ended December 31, 2014, 2013 and 2012 was $285 million, $167 million and $173 million, respectively. Cash received from stock options exercised during the year ended December 31, 2014, 2013 and 2012 was $226 million, $138 million and $140 million, respectively, and tax benefits realized from these exercises of stock options was $114 million, $67 million and $69 million, respectively. Total unrecognized compensation cost related to unvested stock options as of December 31, 2014, without taking into account expected forfeitures, was $23 million, which the Company expects to recognize over a weighted-average period of 1.77 years, without taking into account acceleration of vesting.

Stock options, including PBOs, have exercise prices equal to the fair market value of TWC common stock at the date of grant. Generally, stock options vest ratably over a four-year vesting period and expire ten years from the date of grant, subject to continued employment and, in the case of PBOs, subject to the satisfaction and certification of the applicable performance condition. Certain stock option awards provide for accelerated vesting upon the termination of the grantee’s employment after reaching a specified age and years of service or upon certain terminations of the grantee’s employment within 24 months following the closing of the Comcast merger and, in the case of PBOs, subject to the satisfaction and certification of the applicable performance conditions. PBOs are subject to forfeiture if the applicable performance condition is not satisfied. Upon the exercise of a stock option, shares of TWC common stock may be issued from authorized but unissued shares or from treasury stock, if any.

The table below presents the assumptions used to value stock options at their grant date for the years ended December 31, 2013 and 2012 and reflects the weighted average of all awards granted within each year:


	Year Ended December 31,
	2013		2012
Expected volatility		26.14%		30.03%
Expected term to exercise from grant date (in years)		5.94		6.43
Risk-free rate		1.19%		1.35%
Expected dividend yield		2.97%		2.91%

14.

EMPLOYEE BENEFIT PLANS

Pension Plans

TWC sponsors the Time Warner Cable Pension Plan (the “TWC Pension Plan”) and the Time Warner Cable Union Pension Plan (the “Union Pension Plan” and, together with the TWC Pension Plan, the “qualified pension plans”), both qualified defined benefit pension plans, that together provide pension benefits to a majority of the Company’s employees. TWC also provides a nonqualified defined benefit pension plan for certain employees (the “nonqualified pension plan” and, together with the qualified pension plans, the “pension plans”). Pension benefits are based on formulas that reflect the employees’ years of service and compensation during their employment period. TWC uses a December 31 measurement date for its pension plans.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in the projected benefit obligation, fair value of plan assets and funded status of the pension plans from January 1 through December 31 are presented below (in millions):


	2014			2013
Projected benefit obligation at beginning of year	$	2,550		$	3,071
Service cost		173			204
Interest cost		144			139
Actuarial (gain) loss		606			(609	)
Plan amendment^(a)		3			(41	)
Settlements		—			(4	)
Benefits paid^(b)(c)		(270	)		(210	)

Projected benefit obligation at end of year	$	3,206		$	2,550

Accumulated benefit obligation at end of year	$	2,709		$	2,166

Fair value of plan assets at beginning of year	$	3,124		$	2,862
Actual return on plan assets		247			470
Employer contributions		5			6
Settlements		—			(4	)
Benefits paid^(b)(c)		(270	)		(210	)

Fair value of plan assets at end of year	$	3,106		$	3,124

Funded status	$	(100	)	$	574

^(a)

On February 7, 2014, the TWC Pension Plan was amended to offer a lump sum option to all participants whose benefit commencement date is on or after January 1, 2015. On March 27, 2013, the TWC Pension Plan was amended with respect to pension benefits accrued by disabled participants (as defined in the TWC Pension Plan) whose long-term disability date occurs on or after April 17, 2013. Participants who become disabled on or after April 17, 2013 will not earn additional benefit service while disabled.

^(b)

On February 21, 2014, 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 benefit effective June 1, 2014 in the form of a lump sum cash payment or certain other optional forms of payment. The opportunity to make this voluntary election was available between March 4, 2014 and April 24, 2014. As a result of this amendment, eligible participants received benefit payments of $210 million during 2014.

^(c)

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 benefit effective December 1, 2013 in the form of a lump-sum payment or certain other optional forms of payment. The opportunity to make this voluntary election was available between September 10, 2013 and October 31, 2013. As a result of this amendment, eligible participants received benefit payments of $167 million during 2013.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the qualified pension plans and the nonqualified pension plan as of December 31, 2014 and 2013 consisted of the following (in millions):


	Qualified Pension Plans				Nonqualified Pension Plan
	December 31,				December 31,
	2014		2013		2014		2013
Projected benefit obligation	$	3,166	$	2,513	$	40	$	37
Accumulated benefit obligation		2,670		2,129		39		37
Fair value of plan assets		3,106		3,124		—		—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pretax amounts recognized in the consolidated balance sheet as of December 31, 2014 and 2013 consisted of the following (in millions):


	December 31,
	2014			2013
Noncurrent asset	$	—		$	611
Current liability		(5	)		(5	)
Noncurrent liability		(95	)		(32	)

Total amounts recognized in assets and liabilities	$	(100	)	$	574

Accumulated other comprehensive income (loss), net:
Net actuarial loss	$	(802	)	$	(211	)
Prior service credit		30			37

Total amounts recognized in TWC shareholders’ equity	$	(772	)	$	(174	)

The components of net periodic benefit costs for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in millions):


	Year Ended December 31,
	2014			2013			2012
Service cost	$	173		$	204		$	169
Interest cost		144			139			131
Expected return on plan assets		(233	)		(214	)		(176	)
Amounts amortized		(3	)		75			59
Settlement loss		—			1			—

Net periodic benefit costs	$	81		$	205		$	183

The estimated amounts that are expected to be amortized from accumulated other comprehensive income (loss), net, into net 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		4.32%		5.27%		4.31%
Rate of compensation increase		4.25%		4.75%		4.75%

In addition, the mortality tables used to determine benefit obligations as of December 31, 2014, 2013 and 2012 consisted of the following: RP 2000 healthy mortality table loaded 5.5% with generational improvements using Scale BB for 2014 and the RP 2000 healthy mortality table projected to 2020 using Scale AA for 2013 and 2012.

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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		7.50%		7.50%		7.75%
Discount rate		5.27%		4.31%		5.21%
Rate of compensation increase		4.75%		4.75%		5.25%

The discount rates used to determine benefit obligations and net periodic benefit costs were determined by the matching of plan liability cash flows to a portfolio of bonds individually selected from a large population of high-quality corporate bonds.

In developing the expected long-term rate of return on plan assets, the Company considered the pension portfolio’s composition, past average rate of earnings, discussions with portfolio managers and the Company’s asset allocation targets. The weighted-average expected long-term rate of return on plan assets used to determine net periodic benefit cost for the year ended December 31, 2015 is expected to be 7.50%.

Pension Assets

The assets of the qualified pension plans are held in a master trust in which the qualified pension plans are the only participating plans (the “Master Trust”). The investment policy for the qualified pension plans is to maximize the long-term rate of return on plan assets within a prudent level of risk and diversification while maintaining adequate funding levels. The investment portfolio is a mix of equity and fixed-income securities with the objective of matching plan liability performance, diversifying risk and achieving a target investment return. The pension plans’ Investment Committee regularly monitors investment performance, investment allocation policies and the performance of individual investment managers of the Master Trust and makes adjustments and changes when necessary. On a periodic basis, the Investment Committee conducts a broad strategic review of its portfolio construction and investment allocation policies. Neither the Company nor the Investment Committee manages any assets internally or directly utilizes derivative instruments or hedging; however, the investment mandate of some investment managers allows the use of derivatives as components of their standard portfolio management strategies. Pension assets are managed in a balanced portfolio comprised of two major components: a return-seeking portion and a liability-matching portion. The expected role of return-seeking investments is to maximize the long-term growth of pension assets with a prudent level of risk, while the role of liability-matching investments is to provide a partial hedge against liability performance associated with changes in interest rates and potentially provide some protection against a prolonged decline in the market value of equity investments. The objective within return-seeking investments is to achieve asset diversity in order to balance return and volatility.

The target and actual investment allocation of the qualified pension plans by asset category as of December 31, 2014 and 2013 consisted of the following:


			Actual Allocation
	Target Allocation		as of December 31,
	Target Allocation		2014		2013
Return-seeking securities		70.0%		68.2%		73.3%
Liability-matching securities		30.0%		31.4%		26.4%
Other investments		0.0%		0.4%		0.3%

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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 December 31, 2014 and 2013 (in millions):


	December 31, 2014
				Fair Value Measurements
	Fair Value			Level 1		Level 2		Level 3
Common stocks:
Domestic^(a)	$	1,176		$	1,176	$	—	$	—
International^(a)		412			412		—		—
Commingled equity funds^(b)		348			—		348		—
Mutual funds^(a)		70			70		—		—
Other equity securities^(c)		3			3		—		—
Corporate debt securities^(d)		361			—		361		—
Commingled bond funds^(b)		268			—		268		—
U.S. Treasury debt securities^(a)		194			194		—		—
Collective trust funds^(e)		80			—		80		—
U.S. government agency asset-backed debt securities^(f)		34			—		34		—
Corporate asset-backed debt securities^(g)		10			—		10		—
Other fixed-income securities^(h)		130			—		130		—
Other investments⁽ⁱ⁾		14			4		—		10

Total investments assets		3,100		$	1,859	$	1,231	$	10

Accrued investment income and other receivables^(j)		79
Accrued liabilities^(j)		(73	)

Fair value of plan assets	$	3,106

100

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	December 31, 2013
				Fair Value Measurements
	Fair Value			Level 1		Level 2		Level 3
Cash	$	1		$	1	$	—	$	—
Common stocks:
Domestic^(a)		1,272			1,272		—		—
International^(a)		491			491		—		—
Commingled equity funds^(b)		338			—		338		—
Mutual funds^(a)		73			73		—		—
Other equity securities^(c)		7			7		—		—
Corporate debt securities^(d)		343			—		343		—
Commingled bond funds^(b)		233			—		233		—
U.S. Treasury debt securities^(a)		133			133		—		—
Collective trust funds^(e)		63			—		63		—
U.S. government agency asset-backed debt securities^(f)		28			—		28		—
Corporate asset-backed debt securities^(g)		11			—		11		—
Other fixed-income securities^(h)		110			—		110		—
Other investments⁽ⁱ⁾		10			—		—		10

Total investments assets		3,113		$	1,977	$	1,126	$	10

Accrued investment income and other receivables^(j)		67
Accrued liabilities^(j)		(56	)

Fair value of plan assets	$	3,124

^(a)

Common stocks, mutual funds and U.S. Treasury debt securities are valued at the closing price reported on the active market on which the individual securities are traded. No single industry comprised a significant portion of common stock held by the qualified pension plan as of December 31, 2014 and 2013.

^(b)	Commingled equity funds and commingled bond funds are valued using the net asset value provided by the administrator of the fund. The net asset value is based on the value of the underlying assets owned by the fund, less liabilities, and then divided by the number of units outstanding.

^(c)	Other equity securities consist of preferred stocks, which are valued at the closing price reported on the active market on which the individual securities are traded.

^(d)

Corporate debt securities are valued based on observable prices from the new issue market, benchmark quotes, secondary trading and dealer quotes. An option adjusted spread model is incorporated to adjust spreads of issues that have early redemption features and final spreads are added to the U.S. Treasury curve.

^(e)

Collective trust funds primarily consist of short-term investment strategies comprised of instruments issued or fully guaranteed by the U.S. government and/or its agencies and are valued using the net asset value provided by the administrator of the fund. The net asset value is based on the value of the underlying assets owned by the fund, less liabilities, and then divided by the number of units outstanding.

^(f)

U.S. government agency asset-backed debt securities consist of pass-through mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association valued using available trade information, dealer quotes, market indices and research reports, spreads, bids and offers.

^(g)	Corporate asset-backed debt securities primarily consist of pass-through mortgage-backed securities issued by U.S. and foreign corporations valued using available trade information, dealer quotes, market indices and research reports, spreads, bids and offers.

^(h)

Other fixed-income securities consist of foreign government debt securities, municipal bonds and U.S. government agency debt securities, which are valued based on observable prices from the new issue market, benchmark quotes, secondary trading and dealer quotes. An option adjusted spread model is incorporated to adjust spreads of issues that have early redemption features and final spreads are added to the U.S. Treasury curve.

⁽ⁱ⁾

Other investments primarily consist of private equity investments, such as 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 most recent equity financing taking into consideration illiquidity. Hedge funds are valued using the net asset value provided by the administrator of the fund, which is based on the value of the underlying assets owned by the fund, less liabilities, and then divided by the number of units outstanding.

^(j)

Accrued investment income and other receivables includes amounts receivable under foreign exchange contracts of $67 million and $54 million as of December 31, 2014 and 2013, respectively. Accrued liabilities includes amounts accrued under foreign exchange contracts of $67 million and $54 million as of December, 2014 and 2013, respectively. The fair value of the assets and liabilities associated with these foreign exchange contracts are presented on a gross basis and are valued using the exchange rates in effect for the applicable currencies as of the valuation date (a Level 1 fair value measurement).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in the fair value of investment assets valued using significant unobservable inputs (Level 3) from January 1 through December 31 are presented below (in millions):


	2014			2013
Balance at beginning of year	$	10		$	13
Purchases and sales:
Purchases		2			1
Sales		(2	)		(4	)

Sales, net		—			(3	)

Balance at end of year	$	10		$	10

Expected Cash Flows

The Company made no cash contributions to the qualified pension plans during 2014; however, the Company may make discretionary cash contributions to the qualified pension plans in 2015. 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 2015 to the extent benefits are paid.

Benefit payments for the pension plans are expected to be $107 million in 2015, $124 million in 2016, $139 million in 2017, $154 million in 2018, $169 million in 2019 and $1.085 billion in 2020 to 2024.

Multiemployer Plans

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, 2013 and 2012, the Company contributed $45 million, $44 million and $42 million to multiemployer plans.

The risks of participating in multiemployer pension plans are different from single-employer pension plans in the following aspects: (a) assets contributed to a multiemployer pension plan by one employer may be used to provide benefits to employees of other participating employers, (b) if a participating employer stops contributing to the multiemployer pension plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (c) if TWC chooses to stop participating in any of the multiemployer pension plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The multiemployer pension plans to which the Company contributes each received a Pension Protection Act “green” zone status in 2013. The zone status is based on the most recent information the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the green zone are at least 80% funded.

Defined Contribution Plan

TWC employees also participate in a defined contribution plan, the TWC Savings Plan, for which the expense for employer matching contributions totaled $91 million in 2014, $82 million in 2013 and $77 million in 2012. The Company’s contributions to the TWC Savings Plan are primarily based on a percentage of the employees’ elected contributions and are subject to plan provisions.

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15.

MERGER-RELATED AND RESTRUCTURING COSTS

Merger-related and restructuring costs for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in millions):


	Year Ended December 31,
	2014		2013		2012
Merger-related costs	$	198	$	13	$	54
Restructuring costs		27		106		61

Total merger-related and restructuring costs	$	225	$	119	$	115

Merger-related Costs

For the year ended December 31, 2014, the Company incurred merger-related costs of $198 million, which primarily consisted of Comcast merger-related costs, including employee retention costs of $121 million and advisory and legal fees of $74 million. Merger-related costs in 2014 also included $3 million of costs incurred in connection with the DukeNet acquisition. For the year ended December 31, 2013, the Company incurred merger-related 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. Changes in accruals for merger-related costs from January 1 through December 31 are presented below (in millions):


	Employee Costs			Other Costs			Total
Costs incurred	$	22		$	32		$	54
Cash paid		(15	)		(25	)		(40	)

Remaining liability as of December 31, 2012		7			7			14
Costs incurred		—			13			13
Cash paid		(4	)		(17	)		(21	)

Remaining liability as of December 31, 2013		3			3			6
Costs incurred		68			75			143
Adjustments		(1	)		—			(1	)
Cash paid		(5	)		(61	)		(66	)

Remaining liability as of December 31, 2014^(a)	$	65		$	17		$	82

^(a)	The remaining $82 million liability as of December 31, 2014 is classified as a current liability in the consolidated balance sheet.

In addition to the cash settled liabilities shown in the table above, the Company also issued retention RSUs, as discussed in Note 13, which resulted in additional merger-related costs of $56 million for the year ended December 31, 2014.

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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 other exit costs. The Company expects to incur additional restructuring costs in 2015. Changes in restructuring reserves from January 1 through December 31 are presented below (in millions):


	Employee Termination Costs			Other Exit Costs			Total
Remaining liability as of December 31, 2011	$	29		$	4		$	33
Costs incurred		46			15			61
Cash paid		(51	)		(16	)		(67	)

Remaining liability as of December 31, 2012		24			3			27
Costs incurred		88			18			106
Cash paid		(73	)		(17	)		(90	)

Remaining liability as of December 31, 2013		39			4			43
Costs incurred		14			16			30
Adjustments		(3	)		—			(3	)
Cash paid		(42	)		(20	)		(62	)

Remaining liability as of December 31, 2014^(a)	$	8		$	—		$	8

^(a)	Of the remaining liability as of December 31, 2014, $6 million is classified as a current liability, with the remaining amount classified as a noncurrent liability in the consolidated balance sheet. Amounts are expected to be paid through March 2018.

16.

INCOME TAXES

The current and deferred income tax (benefit) provision for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in millions):


	Year Ended December 31,
	2014		2013			2012
Federal:
Current	$	363	$	631		$	495
Deferred		681		411			634
State:
Current		98		91			120
Deferred		75		(48	)		(72	)

Total	$	1,217	$	1,085		$	1,177

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The differences between income tax (benefit) provision expected at the U.S. federal statutory income tax rate of 35% and income tax (benefit) provision provided for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in millions):


	Year Ended December 31,
	2014			2013			2012
Income tax provision at U.S. federal statutory rate	$	1,137		$	1,064		$	1,168
State and local taxes, net of federal tax effects		112			28			31
Other		(32	)		(7	)		(22	)

Total	$	1,217		$	1,085		$	1,177

The income tax provision and effective tax rate for the year ended December 31, 2014 include a benefit of $24 million as a result of the passage of the New York State budget during the first 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 deferred income tax liability as a result of changes to state tax apportionment factors and (ii) a benefit of $27 million resulting from income tax reform legislation enacted in North Carolina, which, along with other changes, phases in a reduction in North Carolina’s corporate income tax rate over several years.

The income tax provision and effective tax rate for the year ended December 31, 2012 include (i) a benefit of $63 million related to a change in the tax rate applied to calculate the Company’s net deferred income tax liability as a result of an internal reorganization effective on September 30, 2012, (ii) a benefit of $47 million primarily related to a California state tax law change, (iii) a benefit of $46 million related to the reversal of a valuation allowance against a deferred income tax asset associated with the Company’s investment in Clearwire and (iv) a charge of $15 million related to the recording of a deferred income tax liability associated with a partnership basis difference.

Significant components of deferred income tax liabilities, net, as of December 31, 2014 and 2013 consisted of the following (in millions):


	December 31,
	2014			2013
Cable franchise rights and customer relationships, net	$	(8,298	)	$	(7,979	)
Property, plant and equipment		(4,466	)		(4,157	)
Other		(133	)		(328	)

Deferred income tax liabilities		(12,897	)		(12,464	)
Net operating loss carryforwards^(a)		92			202
Tax credit carryforwards^(a)		31			32
Other		511			494
Valuation allowances^(b)		(28	)		(28	)

Deferred income tax assets		606			700

Deferred income tax liabilities, net^(c)	$	(12,291	)	$	(11,764	)

^(a)	Net operating loss and tax credit carryforwards expire in varying amounts through 2034. Aside from certain net operating loss and state tax credit carryforwards for which a valuation allowance has been established, the Company does not expect these carryforwards to expire unutilized.

^(b)

The Company’s valuation allowance for deferred income tax assets recorded as of December 31, 2014 and 2013, primarily relates to certain net operating loss and state tax credit carryforwards. The valuation allowance is based upon the Company’s assessment that it is more likely than not that a portion of the deferred income tax asset will not be realized.

^(c)	Deferred income tax liabilities, net, includes current deferred income tax assets of $269 million and $334 million as of December 31, 2014 and 2013, respectively.

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Changes in deferred income tax liabilities, net, from January 1 through December 31 are presented below (in millions):


	2014			2013			2012
Balance at beginning of year	$	(11,764	)	$	(10,963	)	$	(9,931	)
Deferred income tax provision		(756	)		(363	)		(562	)
Business acquisitions^(a)		—			5			(530	)
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		230			(377	)		100
Change in accumulated deferred gains (losses) on cash flow hedges		(1	)		(66	)		(40	)

Balance at end of year	$	(12,291	)	$	(11,764	)	$	(10,963	)

^(a)	Amounts relate to the acquisition of Insight.

Uncertain Income Tax Positions

The Company recognizes income tax benefits for those income tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the positions. The reserve for uncertain income tax positions is included in other liabilities in the consolidated balance sheet. Changes in the reserve for uncertain income tax positions, excluding the related accrual for interest and penalties, from January 1 through December 31 are presented below (in millions):


	2014			2013			2012
Balance at beginning of year	$	108		$	73		$	50
Additions for prior year tax positions		16			30			17
Additions for current year tax positions		13			19			21
Reductions for prior year tax positions		(5	)		—			—
Lapses in statute of limitations		(5	)		(3	)		(3	)
Settlements and reversals of timing differences		(15	)		(11	)		(12	)

Balance at end of year	$	112		$	108		$	73

If the Company were to recognize the benefits of these uncertain income tax positions, the income tax provision and effective tax rate would be impacted by $74 million, $68 million and $50 million, including interest and penalties and net of the federal and state benefit for income taxes, for the years ended December 31, 2014, 2013 and 2012, respectively. These benefit amounts include interest and penalties of $15 million, $20 million and $15 million for the years ended December 31, 2014, 2013 and 2012, respectively, net of the federal and state benefit for income taxes.

The impact of temporary differences and tax attributes are considered when calculating accruals for interest and penalties associated with the reserve for uncertain income tax positions. The amount accrued for interest and penalties, before the federal and state benefit for income taxes, as of December 31, 2014 and 2013 was $20 million and $28 million, respectively. The Company recognizes interest and penalties accrued on uncertain income tax positions as part of the income tax provision. The income tax provision for the years ended December 31, 2014, 2013 and 2012 includes provision (benefit) related to interest and penalties, before the federal and state provision (benefit) for income taxes, of $(7) million, $6 million and $6 million, respectively.

The Company has determined that it is reasonably possible that its existing reserve for uncertain income tax positions as of December 31, 2014 could decrease by up to approximately $17 million during the twelve-month period ending

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December 31, 2015 related to various ongoing audits and settlement discussions with the Internal Revenue Service (the “IRS”) and various state and local jurisdictions.

If the Company were to recognize the benefits of these uncertain income tax positions upon a favorable resolution of these matters, the income tax provision and effective tax rate could be impacted by up to approximately $12 million, including interest and penalties and net of the federal and state benefit for income taxes. This benefit amount includes interest and penalties of approximately $6 million, net of the federal and state benefit for income taxes. The Company otherwise does not currently anticipate that its reserve for uncertain income tax positions as of December 31, 2014 will significantly increase or decrease during the twelve-month period ended December 31, 2015; however, various events could cause the Company’s current expectations to change in the future.

In September 2014, the IRS examination of the Company’s income tax returns for 2005 to 2007, which are periods prior to TWC’s separation from Time Warner in March 2009 (the “Separation”), was settled with the exception of an immaterial item that has been referred to the IRS Appeals Division. In August 2014, the IRS examination of the Company’s 2009 and 2010 income tax returns for periods after the Separation was also settled. The resolution of these examinations did not have a material impact on the Company’s consolidated financial position or results of operations. In June 2014, the IRS started the examination of the Company’s 2008 and 2009 income tax returns for periods prior to the Separation. In December 2014, the IRS also started the examination of the Company’s 2011 and 2012 income tax returns. The Company does not anticipate that these examinations will have a material impact on the Company’s consolidated financial position or results of operations. In addition, the Company is also subject to ongoing examinations of the Company’s tax returns by state and local tax authorities for various periods. Activity related to these state and local examinations did not have a material impact on the Company’s consolidated financial position or results of operations in 2014, nor does the Company anticipate a material impact in the future.

17.

SEGMENT INFORMATION

The Company classifies its operations into the following three reportable segments, which have been determined based on how management evaluates and manages the business:

•

Residential Services, which principally consists of video, high-speed data and voice services provided to residential customers as well as other residential services, including security and home management services.

•

Business Services, which principally consists 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 arm of TWC, (ii) TWC-owned and/or operated regional sports networks (“RSNs”) and local sports, news and lifestyle channels (e.g., Time Warner Cable News NY1) and (iii) other operating revenue and costs, including those derived from the Advance/Newhouse Partnership and home shopping network-related services. The business units reflected in the Other Operations segment individually do not meet the thresholds to be reported as separate reportable segments.

In addition to the above reportable segments, the Company has shared functions (referred to as “Shared Functions”) that include activities not attributable to a specific reportable segment. Shared Functions consists of operating costs and expenses 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 procurement) as well as other activities not attributable to a

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reportable segment. As such, the reportable segment results reflect how management views such segments in assessing financial performance and allocating resources and are not necessarily indicative of the results of operations that each segment would have achieved had they operated as stand-alone entities during the periods presented.

In evaluating the profitability of the Company’s segments, the components of net income (loss) below OIBDA, as defined below, are not separately evaluated by management at the segment level. Due to the nature of the Company’s operations, a majority of its assets, including its distribution systems, are utilized across the Company’s operations and are not segregated by segment. In addition, segment assets are not reported to, or used by, management to allocate resources or assess the performance of the Company’s segments. Accordingly, the Company has not disclosed asset information by segment.

Segment information for the years ended December 31, 2014, 2013 and 2012 is as follows (in millions):


	Year Ended December 31, 2014
	Residential Services Segment			Business Services Segment			Other Operations Segment			Shared Functions			Intersegment Eliminations			Total Consolidated
Revenue^(a)	$	18,446		$	2,838		$	1,772		$	—		$	(244	)	$	22,812
Operating costs and expenses		(9,823	)		(1,119	)		(985	)		(2,901	)		244			(14,584	)
Merger-related and restructuring costs		—			—			—			(225	)		—			(225	)

OIBDA	$	8,623		$	1,719		$	787		$	(3,126	)	$	—			8,003

Depreciation																	(3,236	)
Amortization																	(135	)

Operating Income																$	4,632


	Year Ended December 31, 2013
	Residential Services Segment			Business Services Segment			Other Operations Segment			Shared Functions			Intersegment Eliminations			Total Consolidated
Revenue^(a)	$	18,402		$	2,312		$	1,602		$	—		$	(196	)	$	22,120
Operating costs and expenses		(9,714	)		(961	)		(769	)		(2,892	)		196			(14,140	)
Merger-related and restructuring costs		—			—			—			(119	)		—			(119	)

OIBDA	$	8,688		$	1,351		$	833		$	(3,011	)	$	—			7,861

Depreciation																	(3,155	)
Amortization																	(126	)

Operating Income																$	4,580

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	Year Ended December 31, 2012
	Residential Services Segment			Business Services Segment			Other Operations Segment			Shared Functions			Intersegment Eliminations			Total Consolidated
Revenue^(a)	$	18,175		$	1,901		$	1,460		$	—		$	(150	)	$	21,386
Operating costs and expenses		(9,463	)		(779	)		(614	)		(2,856	)		150			(13,562	)
Merger-related and restructuring costs		—			—			—			(115	)		—			(115	)

OIBDA	$	8,712		$	1,122		$	846		$	(2,971	)	$	—			7,709

Depreciation																	(3,154	)
Amortization																	(110	)

Operating Income																$	4,445

^(a)	Revenue derived from outside the U.S. was insignificant in all periods presented. No single customer accounted for a significant amount of revenue in any period presented.

Intersegment Eliminations relates to the programming provided to the Residential Services and Business Services segments by the 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 the following (in millions):


	Year Ended December 31,
	2014		2013		2012
Residential Services	$	—	$	—	$	—
Business Services		—		—		—
Other Operations		244		196		150

Total intersegment revenue	$	244	$	196	$	150

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Revenue for the years ended December 31, 2014, 2013 and 2012 was derived from the following sources (in millions):


	Year Ended December 31,
	2014			2013			2012
Residential Services revenue:
Video	$	10,002		$	10,481		$	10,917
High-speed data		6,428			5,822			5,090
Voice		1,932			2,027			2,104
Other		84			72			64

Total Residential Services revenue		18,446			18,402			18,175
Business Services revenue:
Video		365			347			323
High-speed data		1,341			1,099			912
Voice		511			421			306
Wholesale transport		415			251			184
Other		206			194			176

Total Business Services revenue		2,838			2,312			1,901
Other Operations revenue:
Advertising		1,127			1,019			1,053
Other		645			583			407

Total Other Operations revenue		1,772			1,602			1,460
Intersegment eliminations		(244	)		(196	)		(150	)

Total revenue	$	22,812		$	22,120		$	21,386

Use of OIBDA

Management uses Operating Income before Depreciation and Amortization (“OIBDA”), among other measures, in evaluating the segment’s performance because it eliminates the effects of (i) considerable amounts of noncash depreciation and amortization and (ii) items not within the control of the Company’s operations managers (such as income tax provision, other income (expense), net, and interest expense, net). Management also uses this measure to evaluate the Company’s consolidated operating performance and to allocate resources and capital to the segments. Performance measures derived from OIBDA are also used in the Company’s annual incentive compensation programs. In addition, this measure is commonly used by analysts, investors and others in evaluating the Company’s performance.

This measure has inherent limitations. For example, OIBDA does not reflect capital expenditures or the periodic costs of certain capitalized assets used in generating revenue. To compensate for such limitations, management evaluates the Company’s consolidated performance through, among other measures, various cash flow measures, which reflect capital expenditure decisions, and net income attributable to TWC shareholders, which reflects the periodic costs of capitalized assets. OIBDA also fails to reflect the significant costs borne by the Company for income taxes and debt servicing costs, the results of the Company’s equity investments and other non-operational income or expense. Management compensates for these limitations by using other analytics such as a review of net income attributable to TWC shareholders.

This non-GAAP measure should be considered in addition to, not as a substitute for, the Company’s Operating Income and net income attributable to TWC shareholders, as well as other measures of financial performance reported in accordance with GAAP, and may not be comparable to similarly titled measures used by other companies.

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18.

COMMITMENTS AND CONTINGENCIES

In March 2003, the interests in cable networks and filmed entertainment held by TWE were transferred to Time Warner and all of Time Warner’s interests in cable systems were transferred to the Company (the “TWE Restructuring”). Prior to the TWE Restructuring, TWE had various contingent commitments, including guarantees, related to the TWE non-cable businesses. In connection with the TWE Restructuring, some of these commitments were not transferred with their applicable non-cable business and they remain contingent commitments of TWE (and assumed by TWCE in connection with various internal reorganizations). Time Warner and its subsidiary, Warner Communications Inc., have agreed, on a joint and several basis, to indemnify TWCE from and against any and all of these contingent liabilities, but TWE (as assumed by TWCE) remains a party to these commitments.

TWC has cable franchise agreements containing provisions requiring the construction of cable plant and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, TWC obtains surety bonds or letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Such surety bonds and letters of credit as of December 31, 2014 and 2013 totaled $373 million. Payments under these arrangements are required only in the event of nonperformance. TWC does not expect that these contingent commitments will result in any amounts being paid in the foreseeable future.

Contractual Obligations

The Company’s total rent expense, which primarily includes facility rental expense and pole attachment rental fees, was $298 million in 2014, $257 million in 2013 and $237 million in 2012. The Company has lease obligations under various operating leases including minimum lease obligations for real estate and operating equipment.

The minimum rental commitments under long-term operating leases during the next five years are $162 million in 2015, $156 million in 2016, $127 million in 2017, $108 million in 2018, $84 million in 2019 and $293 million thereafter.

The following table summarizes the Company’s aggregate contractual obligations outstanding as 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 obligations are expected to have on the Company’s liquidity and cash flows in future periods (in millions):


2015	$	5,612
2016 - 2017		9,305
2018 - 2019		5,994
Thereafter		12,062

Total	$	32,973

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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 amounts due under such contracts may differ from the amounts above based on the actual subscriber numbers and tier placements. These amounts also include programming rights negotiated directly with content owners for distribution on TWC-owned channels or networks and commitments related to TWC’s role as an advertising and distribution sales agent for third party-owned channels or networks.

Legal Proceedings

Following the announcement of the Comcast merger on February 13, 2014, eight putative class action complaints challenging the merger were filed on behalf of purported TWC stockholders, seven in the Supreme Court of the State of New York, County of New York and one in the Court of Chancery of the State of Delaware. These complaints were captioned: Barrett v. Time Warner Cable Inc., et al. (N.Y. Sup. Ct.); Karl Graulich IRA v. Marcus, et al. (N.Y. Sup. Ct.); Wedeking v. Time Warner Cable Inc., et al. (N.Y. Sup. Ct.); Lassoff v. Time Warner Cable Inc., et al. (N.Y. Sup. Ct.); Thomas v. Marcus, et al. (N.Y. Sup. Ct.); Tangarone v. Time Warner Cable Inc., et al. (N.Y. Sup. Ct.); Louisiana Municipal Police Employees’ Retirement System v. Black, et al. (Del. Ch.); and Empire State Supply Corp. v. Time Warner Cable Inc., et al. (N.Y. Sup. Ct.). On March 25, 2014, the plaintiff in Tangarone v. Time Warner Cable Inc. voluntarily discontinued the action in the New York Supreme Court and re-filed the action in the Court of Chancery of the State of Delaware under the caption Tangarone v. Time Warner Cable Inc., et al. (Del. Ch.). Likewise, on March 26, 2014, the plaintiffs in Empire State Supply Corp. v. Time Warner Cable Inc., et al. voluntarily discontinued the action in the New York Supreme Court, and re-filed the action on March 27, 2014 in the Court of Chancery of the State of Delaware under the caption Empire State Supply Corp. v. Time Warner Cable Inc., et al. (Del. Ch.). On March 28, 2014, the plaintiffs in Louisiana Municipal Police Employees’ Retirement System v. Black, et al. (Del. Ch.) filed an amended complaint. On April 2, 2014, the Court orally granted a motion to consolidate the pending actions in the New York Supreme Court under the caption Barrett, et al. v. Time Warner Cable Inc., et al. (N.Y. Sup. Ct.), which the Court did formally by written order on April 15, 2014. On April 3, 2014, the plaintiffs in Barrett, et al. v. Time Warner Cable Inc., et al. (N.Y. Sup. Ct.) filed a consolidated amended complaint. The various complaints name as defendants the Company, the members of the Company’s Board of Directors, Comcast and Tango Acquisition Sub, Inc. (“Merger Sub”). The complaints assert that the members of the Company’s Board of Directors breached their fiduciary duties to the Company’s stockholders during the Comcast merger negotiations and by entering into the Merger Agreement and approving the Comcast merger, and that Comcast and Merger Sub aided and abetted such breaches of fiduciary duties. The complaints also allege that the Company and its Board of Directors failed to disclose in the registration statement related to the Comcast merger material facts relating to the merger. The complaints seek, among other relief, injunctive relief enjoining the shareholder vote on the Comcast merger, unspecified declaratory and equitable relief, compensatory damages in an unspecified amount, and costs and fees. On July 22, 2014, the parties to the litigation entered into a memorandum of understanding reflecting the terms of an agreement, subject to final approval by the New York Supreme Court and certain other conditions, to settle all of the outstanding litigation challenging the merger. The Company believes that the claims asserted against it in the lawsuits are without merit and, if the settlement does not receive final approval by the New York Supreme Court or otherwise is not consummated, intends to defend against the litigation vigorously.

On December 11, 2013, Constellation Technologies LLC, a wholly owned subsidiary of Rockstar Consortium US LP (“Rockstar”), filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that the Company and its subsidiary, TWCE, infringe six patents purportedly relating to the Company’s use of various technologies, including

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switched digital technology for video delivery, Multiprotocol Label Switching (“MPLS”) networks and data routing techniques, Ethernet passive optical networks and IP Multimedia Subsystem (“IMS”) protocols to provide video, high-speed data and voice services. Rockstar acquired these patents and others from Nortel Networks Limited, a wholly owned subsidiary of Nortel Networks Corporation, in 2011. The plaintiff sought unspecified monetary damages. On January 3, 2014, the plaintiff filed an Amended Complaint, and on February 7, 2014, the Company moved to dismiss certain allegations in the Amended Complaint. On September 29, 2014, the court denied the Company’s motion to dismiss. On December 22, 2014, RPX Corporation, a patent risk management company, entered into an agreement with Rockstar and several of its affiliates to purchase approximately 4,000 patents owned by Rockstar, including the patents at issue in this litigation. Pursuant to the agreement, the Company received non-exclusive licenses to a portfolio of patents, including the patents at issue in this litigation, on terms that are not material to the Company. On January 29, 2015, the U.S. District Court for the Eastern District of Texas dismissed the lawsuit. 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 Protocol (“VoIP”) services. The plaintiff is seeking unspecified monetary damages as well as injunctive relief. The Company intends to defend against this lawsuit vigorously, but is unable to predict the outcome of this lawsuit or reasonably estimate a range of possible loss.

The Company is the defendant in In re: Set-Top Cable Television Box Antitrust Litigation, ten purported class actions filed in federal district courts throughout the U.S. These actions are subject to a Multidistrict Litigation (“MDL”) Order transferring the cases for pretrial proceedings to the U.S. District Court for the Southern District of New York. On July 26, 2010, the plaintiffs filed a third amended consolidated class action complaint (the “Third Amended Complaint”), alleging that the Company violated Section 1 of the Sherman Antitrust Act, various state antitrust laws and state unfair/deceptive trade practices statutes by tying the sales of premium cable television services to the leasing of set-top converter boxes. The plaintiffs are seeking, among other things, unspecified treble monetary damages and an injunction to cease such alleged practices. On September 30, 2010, the Company filed a motion to dismiss the Third Amended Complaint, which the court granted on April 8, 2011. On June 17, 2011, the plaintiffs appealed this decision to the U.S. Court of Appeals for the Second Circuit. The Company intends to defend against this lawsuit vigorously, but is unable to predict the outcome of this lawsuit or reasonably estimate a range of possible loss.

On August 9, 2010, the plaintiffs in Michelle Downs and Laurie Jarrett, et al. v. Insight Communications Company, L.P. filed a second amended complaint in a purported class action in the U.S. District Court for the Western District of Kentucky alleging that Insight Communications Company, L.P. violated Section 1 of the Sherman Antitrust Act by tying the sales of premium cable television services to the leasing of set-top converter boxes, which is similar to the federal claim against the Company in In re: Set-Top Cable Television Box Antitrust Litigation, discussed above. The plaintiffs were seeking, among other things, unspecified treble monetary damages and an injunction to cease such alleged practices. On July 19, 2013, TWC filed a motion for summary judgment, which argued that Insight Communications Company, L.P. did not coerce the plaintiffs to lease a set-top converter box, a necessary element of the plaintiffs’ claim. On July 29, 2014, the court granted TWC’s summary judgment motion and entered judgment in TWC’s favor. On August 26, 2014, the plaintiffs filed a motion for reconsideration, which was denied on December 1, 2014. The plaintiffs did not appeal the grant of summary judgment, terminating the litigation.

From time to time, the Company receives notices from third parties and, in some cases, is party to litigation alleging that certain of the Company’s services or technologies infringe the intellectual property rights of others. Claims of intellectual property infringement could require TWC to enter into royalty or licensing agreements on unfavorable terms, incur substantial monetary liability or be enjoined preliminarily or permanently from further use of the intellectual property in question. In addition, certain agreements entered into by the Company may require it to indemnify the other party for certain third-party intellectual property infringement claims, which could increase the Company’s damages and

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its costs of defending against such claims. Even if the claims are without merit, defending against the claims can be time consuming and costly.

Other Matters

The California Attorney General and the Alameda County, California District Attorney are investigating whether certain of the Company’s waste disposal policies, procedures and practices are in violation of the California Business and Professions Code and the California Health and Safety Code. These entities are seeking injunctive relief, unspecified civil penalties and attorneys’ fees. While the Company is unable to predict the outcome of this investigation, it does not believe that the outcome will have a material effect on its results of operations, financial condition or cash flows.

As part of the TWE Restructuring, Time Warner agreed to indemnify the Company from and against any and all liabilities relating to, arising out of or resulting from specified litigation matters brought against the TWE non-cable businesses (and assumed by TWCE in connection with various internal reorganizations). Although Time Warner has agreed to indemnify the Company against such liabilities, TWE (as assumed by TWCE) remains a named party in certain litigation matters.

The costs and other effects of future litigation, governmental investigations, legal and administrative cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and changes in pending matters (including those matters described above), and developments or assertions by or against the Company 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 consisted of the following (in millions):


	December 31,
	2014		2013
Prepaid income taxes	$	157	$	142
Other prepaid expenses		208		155
Other current assets		26		34

Total other current assets	$	391	$	331

Other Current Liabilities

Other current liabilities as of December 31, 2014 and 2013 consisted of the following (in millions):


	December 31,
	2014		2013
Accrued interest	$	486	$	529
Accrued compensation and benefits		397		394
Accrued insurance		199		185
Accrued franchise fees		151		155
Accrued sales and other taxes		132		132
Other accrued expenses		448		442

Total other current liabilities	$	1,813	$	1,837

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Noncontrolling Interests

During the fourth quarter of 2012, TWC acquired the remaining 45.81% noncontrolling interest in Erie Telecommunications, Inc. (“Erie”) for $32 million and, as a result, TWC owns 100% of Erie. This acquisition was recorded as an equity transaction and is reflected as a financing activity in the consolidated statement of cash flows. As a result, the carrying balance of this noncontrolling interest of $5 million was eliminated, and the remaining $27 million, representing the difference between the purchase price and carrying balance, was recorded as a reduction to additional paid-in capital.

Interest Expense, Net

Interest expense, net, for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in millions):


	Year Ended December 31,
	2014			2013			2012
Interest expense	$	(1,419	)	$	(1,555	)	$	(1,614	)
Interest income		—			3			8

Interest expense, net	$	(1,419	)	$	(1,552	)	$	(1,606	)

Other Income, Net

Other income, net, for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in millions):


	Year Ended December 31,
	2014		2013			2012
Income from equity-method investments, net^(a)	$	33	$	19		$	454
Gain (loss) on equity award reimbursement obligation to Time Warner		1		(10	)		(9	)
Gain on sale of investment in Clearwire		—		—			64
Other investment losses^(b)		—		—			(12	)
Other		1		2			—

Other income, net	$	35	$	11		$	497

^(a)	Income from equity-method investments, net, in 2012 primarily consists of a pretax gain of $430 million associated with SpectrumCo’s sale of its advanced wireless spectrum licenses to Verizon Wireless (refer to Note 7 for further details).

^(b)

Other investment losses in 2012 represents an impairment of the Company’s investment in Canoe Ventures LLC (“Canoe”), an equity-method investee. The impairment was recognized as a result of Canoe’s announcement during the first quarter of 2012 of a restructuring that significantly curtailed its operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Related Party Transactions

Transactions with related parties (i.e., equity-method investees) for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in millions):


	Year Ended December 31,
	2014			2013			2012
Revenue	$	6		$	7		$	9


Costs and expenses:
Programming and content	$	(176	)	$	(205	)	$	(207	)
Other operating		(21	)		(20	)		(24	)

Total	$	(197	)	$	(225	)	$	(231	)

Supplemental Cash Flow Information

Additional financial information with respect to cash (payments) and receipts for the years ended December 31, 2014, 2013 and 2012 is as follows (in millions):


	Year Ended December 31,
	2014			2013			2012
Cash paid for interest	$	(1,562	)	$	(1,740	)	$	(1,773	)
Interest income received^(a)		127			164			171

Cash paid for interest, net	$	(1,435	)	$	(1,576	)	$	(1,602	)


Cash paid for income taxes	$	(366	)	$	(698	)	$	(554	)
Cash refunds of income taxes		14			2			10

Cash paid for income taxes, net	$	(352	)	$	(696	)	$	(544	)

^(a)	Interest income received includes amounts received under interest rate swap contracts.

The consolidated statement of cash flows for the years ended December 31, 2013 and 2012 includes purchases of short-term investments in U.S. Treasury securities of $575 million and $150 million, respectively, (included in purchases of investments). The consolidated statement of cash flows for the year ended December 31, 2013 includes proceeds from the maturity of short-term investments in U.S. Treasury securities of $725 million (included in proceeds from sale, maturity and collection of investments).

The consolidated statement of cash flows for the years ended December 31, 2013 and 2012 does not reflect $51 million and $33 million, respectively, of common stock repurchases that were included in other current liabilities as of December 31, 2013 and 2012, respectively, for which 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 Inc. (the “Parent Company”), (ii) Time Warner Cable Enterprises LLC (“TWCE” or the “Guarantor Subsidiary”), a direct 100% owned subsidiary of the Parent Company, (iii) the direct and indirect non-guarantor subsidiaries of the Parent Company (the “Non-Guarantor

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Subsidiaries”) on a combined basis and (iv) the eliminations necessary to 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 of the voting and economic interests of the Guarantor Subsidiary.

There are no legal or regulatory restrictions on the Parent Company’s ability to obtain funds from any of its 100% owned subsidiaries through dividends, loans or advances.

These condensed consolidating financial statements should be read in conjunction with the consolidated financial statements of Time Warner Cable Inc.

Basis of Presentation

In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) the Parent Company’s interests in the Guarantor Subsidiary and the Non-Guarantor Subsidiaries and (ii) the Guarantor Subsidiary’s interests in the Non-Guarantor Subsidiaries, where applicable, even though all such subsidiaries meet the requirements to be consolidated under GAAP. All intercompany balances and transactions between the Parent Company, the Guarantor Subsidiary and the Non-Guarantor Subsidiaries have been eliminated, as shown in the column “Eliminations.” All assets and liabilities have been allocated to the Parent Company, the Guarantor Subsidiary and the Non-Guarantor Subsidiaries generally based on legal entity ownership. Certain administrative costs have been allocated to the Parent Company, the Guarantor Subsidiary and the Non-Guarantor Subsidiaries based on revenue recorded at the respective entity. Beginning December 1, 2013, the Parent Company began allocating 100% of its third-party interest expense, net of interest income received from intercompany loans, to the Guarantor Subsidiary. Prior to December 1, 2013, a portion of the interest expense incurred by the Parent Company was allocated to the Guarantor Subsidiary and the Non-Guarantor Subsidiaries based on revenue recorded at the respective entity. The income tax provision has been presented based on each subsidiary’s legal entity activity including income tax benefits related to allocated administrative costs and interest expense. Deferred income taxes have been presented based upon the temporary differences between the carrying amounts of the respective assets and liabilities of the applicable entities.

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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		Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
ASSETS
Current assets:
Cash and equivalents	$	481	$	—	$	226		$	—		$	707
Receivables, net		31		—		918			—			949
Receivables from affiliated parties		215		—		27			(242	)		—
Deferred income tax assets		9		—		264			(4	)		269
Other current assets		121		46		224			—			391

Total current assets		857		46		1,659			(246	)		2,316
Investments in and amounts due from consolidated subsidiaries		44,790		46,401		7,641			(98,832	)		—
Investments		—		51		13			—			64
Property, plant and equipment, net		—		28		15,962			—			15,990
Intangible assets subject to amortization, net		—		5		518			—			523
Intangible assets not subject to amortization		—		—		26,012			—			26,012
Goodwill		—		—		3,137			—			3,137
Other assets		385		—		74			—			459

Total assets	$	46,032	$	46,531	$	55,016		$	(99,078	)	$	48,501


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	—	$	567		$	—		$	567
Deferred revenue and subscriber-related liabilities		—		—		198			—			198
Payables to affiliated parties		27		212		3			(242	)		—
Accrued programming and content expense		—		—		902			—			902
Current maturities of long-term debt		1,008		—		9			—			1,017
Other current liabilities		529		67		1,221			(4	)		1,813

Total current liabilities		1,564		279		2,900			(246	)		4,497
Long-term debt		20,564		2,061		76			—			22,701
Deferred income tax liabilities, net		23		214		12,323			—			12,560
Long-term payables to affiliated parties		7,641		14,702		—			(22,343	)		—
Other liabilities		154		91		481			—			726
TWC shareholders’ equity:
Due to (from) TWC and subsidiaries		8,073		1,216		(9,289	)		—			—
Other TWC shareholders’ equity		8,013		27,968		48,521			(76,489	)		8,013

Total TWC shareholders’ equity		16,086		29,184		39,232			(76,489	)		8,013
Noncontrolling interests		—		—		4			—			4

Total equity		16,086		29,184		39,236			(76,489	)		8,017

Total liabilities and equity	$	46,032	$	46,531	$	55,016		$	(99,078	)	$	48,501

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Condensed Consolidating Balance Sheet as of December 31, 2013


	Parent Company		Guarantor Subsidiary		Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
ASSETS
Current assets:
Cash and equivalents	$	316	$	—	$	209		$	—		$	525
Receivables, net		63		1		890			—			954
Receivables from affiliated parties		158		—		28			(186	)		—
Deferred income tax assets		5		9		320			—			334
Other current assets		120		42		169			—			331

Total current assets		662		52		1,616			(186	)		2,144
Investments in and amounts due from consolidated subsidiaries		42,492		43,285		7,641			(93,418	)		—
Investments		—		43		13			—			56
Property, plant and equipment, net		—		30		15,026			—			15,056
Intangible assets subject to amortization, net		—		6		546			—			552
Intangible assets not subject to amortization		—		—		26,012			—			26,012
Goodwill		—		—		3,196			—			3,196
Other assets		1,165		—		92			—			1,257

Total assets	$	44,319	$	43,416	$	54,142		$	(93,604	)	$	48,273


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	—	$	565		$	—		$	565
Deferred revenue and subscriber-related liabilities		—		—		188			—			188
Payables to affiliated parties		28		155		3			(186	)		—
Accrued programming and content expense		—		—		869			—			869
Current maturities of long-term debt		1,758		—		9			—			1,767
Other current liabilities		591		67		1,179			—			1,837

Total current liabilities		2,377		222		2,813			(186	)		5,226
Long-term debt		21,179		2,065		41			—			23,285
Deferred income tax liabilities, net		359		161		11,578			—			12,098
Long-term payables to affiliated parties		7,641		14,702		—			(22,343	)		—
Other liabilities		140		89		488			—			717
TWC shareholders’ equity:
Due to (from) TWC and subsidiaries		5,680		453		(6,133	)		—			—
Other TWC shareholders’ equity		6,943		25,724		45,351			(71,075	)		6,943

Total TWC shareholders’ equity		12,623		26,177		39,218			(71,075	)		6,943
Noncontrolling interests		—		—		4			—			4

Total equity		12,623		26,177		39,222			(71,075	)		6,947

Total liabilities and equity	$	44,319	$	43,416	$	54,142		$	(93,604	)	$	48,273

119

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Condensed Consolidating Statement of Operations for the Year Ended December 31, 2014


	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
Revenue	$	—		$	—		$	22,812		$	—		$	22,812
Costs and expenses:
Programming and content		—			—			5,294			—			5,294
Sales and marketing		—			—			2,192			—			2,192
Technical operations		—			—			1,530			—			1,530
Customer care		—			—			839			—			839
Other operating		—			—			4,729			—			4,729
Depreciation		—			—			3,236			—			3,236
Amortization		—			—			135			—			135
Merger-related and restructuring costs		66			—			159			—			225

Total costs and expenses		66			—			18,114			—			18,180

Operating Income (Loss)		(66	)		—			4,698			—			4,632
Equity in pretax income of consolidated subsidiaries		3,516			4,842			—			(8,358	)		—
Interest income (expense), net		(202	)		(1,426	)		209			—			(1,419	)
Other income, net		—			6			29			—			35

Income before income taxes		3,248			3,422			4,936			(8,358	)		3,248
Income tax provision		(1,217	)		(1,284	)		(1,287	)		2,571			(1,217	)

Net income		2,031			2,138			3,649			(5,787	)		2,031
Less: Net income attributable to noncontrolling interests		—			—			—			—			—

Net income attributable to TWC shareholders	$	2,031		$	2,138		$	3,649		$	(5,787	)	$	2,031


Condensed Consolidating Statement of Comprehensive Income for the Year Ended December 31, 2014

	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
Net income	$	2,031		$	2,138		$	3,649		$	(5,787	)	$	2,031
Change in accumulated unrealized losses on pension benefit obligation, net of tax		(369	)		—			—			—			(369	)
Change in accumulated deferred gains (losses) on cash flow hedges, net of tax		1			—			—			—			1

Other comprehensive loss		(368	)		—			—			—			(368	)

Comprehensive income		1,663			2,138			3,649			(5,787	)		1,663
Less: Comprehensive income attributable to noncontrolling interests		—			—			—			—			—

Comprehensive income attributable to TWC shareholders	$	1,663		$	2,138		$	3,649		$	(5,787	)	$	1,663

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Condensed Consolidating Statement of Operations for the Year Ended December 31, 2013


	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
Revenue	$	—		$	—		$	22,120		$	—		$	22,120
Costs and expenses:
Programming and content		—			—			4,950			—			4,950
Sales and marketing		—			—			2,048			—			2,048
Technical operations		—			—			1,500			—			1,500
Customer care		—			—			766			—			766
Other operating		—			—			4,876			—			4,876
Depreciation		—			—			3,155			—			3,155
Amortization		—			—			126			—			126
Merger-related and restructuring costs		—			3			116			—			119

Total costs and expenses		—			3			17,537			—			17,540

Operating Income (Loss)		—			(3	)		4,583			—			4,580
Equity in pretax income of consolidated subsidiaries		3,273			3,659			—			(6,932	)		—
Interest expense, net		(235	)		(501	)		(816	)		—			(1,552	)
Other income (expense), net		1			(5	)		15			—			11

Income before income taxes		3,039			3,150			3,782			(6,932	)		3,039
Income tax provision		(1,085	)		(1,139	)		(973	)		2,112			(1,085	)

Net income		1,954			2,011			2,809			(4,820	)		1,954
Less: Net income attributable to noncontrolling interests		—			—			—			—			—

Net income attributable to TWC shareholders	$	1,954		$	2,011		$	2,809		$	(4,820	)	$	1,954


Condensed Consolidating Statement of Comprehensive Income for the Year Ended December 31, 2013

	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
Net income	$	1,954		$	2,011		$	2,809		$	(4,820	)	$	1,954
Change in accumulated unrealized losses on pension benefit obligation, net of tax		604			—			—			—			604
Change in accumulated deferred gains (losses) on cash flow hedges, net of tax		104			—			—			—			104
Other changes		(1	)		—			(1	)		1			(1	)

Other comprehensive income (loss)		707			—			(1	)		1			707

Comprehensive income		2,661			2,011			2,808			(4,819	)		2,661
Less: Comprehensive income attributable to noncontrolling interests		—			—			—			—			—

Comprehensive income attributable to TWC shareholders	$	2,661		$	2,011		$	2,808		$	(4,819	)	$	2,661

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Condensed Consolidating Statement of Operations for the Year Ended December 31, 2012


	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
Revenue	$	—		$	—		$	21,386		$	—		$	21,386
Costs and expenses:
Programming and content		—			—			4,703			—			4,703
Sales and marketing		—			—			1,816			—			1,816
Technical operations		—			—			1,434			—			1,434
Customer care		—			—			741			—			741
Other operating		—			—			4,868			—			4,868
Depreciation		—			—			3,154			—			3,154
Amortization		—			—			110			—			110
Merger-related and restructuring costs		24			—			91			—			115

Total costs and expenses		24			—			16,917			—			16,941

Operating Income (Loss)		(24	)		—			4,469			—			4,445
Equity in pretax income of consolidated subsidiaries		3,663			3,484			—			(7,147	)		—
Interest expense, net		(309	)		(307	)		(990	)		—			(1,606	)
Other income, net		—			480			17			—			497

Income before income taxes		3,330			3,657			3,496			(7,147	)		3,336
Income tax provision		(1,175	)		(1,315	)		(948	)		2,261			(1,177	)

Net income		2,155			2,342			2,548			(4,886	)		2,159
Less: Net income attributable to noncontrolling interests		—			—			(4	)		—			(4	)

Net income attributable to TWC shareholders	$	2,155		$	2,342		$	2,544		$	(4,886	)	$	2,155


Condensed Consolidating Statement of Comprehensive Income for the Year Ended December 31, 2012

	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
Net income	$	2,155		$	2,342		$	2,548		$	(4,886	)	$	2,159
Change in accumulated unrealized losses on pension benefit obligation, net of tax		(167	)		—			—			—			(167	)
Change in accumulated deferred gains (losses) on cash flow hedges, net of tax		63			—			—			—			63

Other comprehensive loss		(104	)		—			—			—			(104	)

Comprehensive income		2,051			2,342			2,548			(4,886	)		2,055
Less: Comprehensive income attributable to noncontrolling interests		—			—			(4	)		—			(4	)

Comprehensive income attributable to TWC shareholders	$	2,051		$	2,342		$	2,544		$	(4,886	)	$	2,051

122

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2014


	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations		TWC Consolidated
Cash provided (used) by operating activities	$	(254	)	$	(1,345	)	$	7,949		$	—	$	6,350

INVESTING ACTIVITIES
Capital expenditures		—			—			(4,097	)		—		(4,097	)
Purchases of investments		—			(2	)		—			—		(2	)
Proceeds from sale, maturity and collection of investments		18			1			—			—		19
Acquisition of intangible assets		—			(3	)		(36	)		—		(39	)
Other investing activities		—			(2	)		29			—		27

Cash provided (used) by investing activities		18			(6	)		(4,104	)		—		(4,092	)

FINANCING ACTIVITIES
Short-term borrowings, net		507			—			—			—		507
Repayments of long-term debt		(1,750	)		—			—			—		(1,750	)
Dividends paid		(857	)		—			—			—		(857	)
Repurchases of common stock		(259	)		—			—			—		(259	)
Proceeds from exercise of stock options		226			—			—			—		226
Excess tax benefit from equity-based compensation		141			—			—			—		141
Taxes paid in cash in lieu of shares issued for equity-based compensation		—			—			(76	)		—		(76	)
Net change in investments in and amounts due to and from consolidated subsidiaries		2,394			1,351			(3,745	)		—		—
Other financing activities		(1	)		—			(7	)		—		(8	)

Cash provided (used) by financing activities		401			1,351			(3,828	)		—		(2,076	)


Increase in cash and equivalents		165			—			17			—		182
Cash and equivalents at beginning of year		316			—			209			—		525

Cash and equivalents at end of year	$	481		$	—		$	226		$	—	$	707

123

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2013


	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations		TWC Consolidated
Cash provided (used) by operating activities	$	(188	)	$	(595	)	$	6,536		$	—	$	5,753

INVESTING ACTIVITIES
Capital expenditures		—			—			(3,198	)		—		(3,198	)
Business acquisitions, net of cash acquired		—			(429	)		6			—		(423	)
Purchases of investments		(575	)		(13	)		—			—		(588	)
Return of capital from investees		—			9			—			—		9
Proceeds from sale, maturity and collection of investments		726			—			—			—		726
Acquisition of intangible assets		—			(3	)		(37	)		—		(40	)
Other investing activities		—			—			38			—		38

Cash provided (used) by investing activities		151			(436	)		(3,191	)		—		(3,476	)

FINANCING ACTIVITIES
Repayments of long-term debt		(1,500	)		—			—			—		(1,500	)
Repayments of long-term debt assumed in acquisitions		—			—			(138	)		—		(138	)
Redemption of mandatorily redeemable preferred equity		—			(300	)		—			—		(300	)
Dividends paid		(758	)		—			—			—		(758	)
Repurchases of common stock		(2,509	)		—			—			—		(2,509	)
Proceeds from exercise of stock options		138			—			—			—		138
Excess tax benefit from equity-based compensation		92			—			1			—		93
Taxes paid in cash in lieu of shares issued for equity-based compensation		—			—			(68	)		—		(68	)
Net change in investments in and amounts due to and from consolidated subsidiaries		2,725			1,331			(4,056	)		—		—
Other financing activities		(9	)		—			(5	)		—		(14	)

Cash provided (used) by financing activities		(1,821	)		1,031			(4,266	)		—		(5,056	)


Decrease in cash and equivalents		(1,858	)		—			(921	)		—		(2,779	)
Cash and equivalents at beginning of year		2,174			—			1,130			—		3,304

Cash and equivalents at end of year	$	316		$	—		$	209		$	—	$	525

124

TIME WARNER CABLE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2012


	Parent Company			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			TWC Consolidated
Cash provided (used) by operating activities	$	(191	)	$	(603	)	$	6,319		$	—		$	5,525

INVESTING ACTIVITIES
Capital expenditures		—			—			(3,095	)		—			(3,095	)
Business acquisitions, net of cash acquired		(1,350	)		—			10			—			(1,340	)
Purchases of investments		(150	)		(17	)		(40	)		—			(207	)
Return of capital from investees		—			1,112			88			—			1,200
Proceeds from sale, maturity and collection of investments		—			64			40			—			104
Acquisition of intangible assets		(3	)		—			(34	)		—			(37	)
Investments in (distributions and sale proceeds from) consolidated subsidiaries		(33	)		—			(392	)		425			—
Other investing activities		—			—			30			—			30

Cash provided (used) by investing activities		(1,536	)		1,159			(3,393	)		425			(3,345	)

FINANCING ACTIVITIES
Short-term borrowings, net		392			—			—			(392	)		—
Proceeds from issuance of long-term debt		2,258			—			—			—			2,258
Repayments of long-term debt		(1,500	)		(600	)		—			—			(2,100	)
Repayments of long-term debt assumed in acquisitions		—			—			(1,730	)		—			(1,730	)
Debt issuance costs		(26	)		—			—			—			(26	)
Dividends paid		(700	)		—			—			—			(700	)
Repurchases of common stock		(1,850	)		—			—			—			(1,850	)
Proceeds from exercise of stock options		140			—			—			—			140
Excess tax benefit from equity-based compensation		62			—			19			—			81
Taxes paid in cash in lieu of shares issued for equity-based compensation		—			—			(45	)		—			(45	)
Acquisition of noncontrolling interest		—			—			(32	)		—			(32	)
Net change in investments in and amounts due to and from consolidated subsidiaries		769			44			(780	)		(33	)		—
Other financing activities		(16	)		—			(33	)		—			(49	)

Cash used by financing activities		(471	)		(556	)		(2,601	)		(425	)		(4,053	)


Increase (decrease) in cash and equivalents		(2,198	)		—			325			—			(1,873	)
Cash and equivalents at beginning of year		4,372			—			805			—			5,177

Cash and equivalents at end of year	$	2,174		$	—		$	1,130		$	—		$	3,304

125

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 internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes self-monitoring mechanisms and actions taken to correct deficiencies as they are identified. Because of the inherent limitations in any internal control, no matter how well designed, misstatements may occur and not be prevented or detected. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

Management conducted an evaluation of the effectiveness of the Company’s system of internal control over financial reporting as of December 31, 2014 based on the framework set forth in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on its evaluation, management concluded that, as of December 31, 2014, the Company’s internal control over financial reporting is effective based on the specified criteria.

The Company’s internal control over financial reporting as of December 31, 2014 has been audited by the Company’s independent auditor, Ernst & Young LLP, a registered public accounting firm, as stated in their report at page 128 herein.

126

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and

Shareholders of Time Warner Cable Inc.

We have audited the accompanying consolidated balance sheet of Time Warner Cable Inc. (the “Company”) as of December 31, 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. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Time Warner Cable Inc. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 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 on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission “(2013 framework)” and our report dated February 13, 2015 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

New York, New York

February 13, 2015

127

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and

Shareholders of Time Warner Cable Inc.

We have audited Time Warner Cable Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission “(2013 framework)” (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Time Warner Cable Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Time Warner Cable Inc. as of December 31, 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.

/s/ ERNST & YOUNG LLP

New York, New York

February 13, 2015

128

TIME WARNER CABLE INC.

SELECTED FINANCIAL INFORMATION

The selected financial information set forth below as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 has been derived from and should be read in conjunction with the audited consolidated financial statements and other financial information presented elsewhere herein. The selected financial information set forth below as of December 31, 2012, 2011 and 2010 and for the years ended December 31, 2011 and 2010 has been derived from audited consolidated financial statements not included herein. Capitalized terms are as defined and described in the consolidated financial statements or elsewhere herein.


	Year Ended December 31,
	2014			2013			2012			2011			2010
	(in millions, except per share data)
Selected Operating Statement Information:
Revenue	$	22,812		$	22,120		$	21,386		$	19,675		$	18,868
Costs and expenses^(a)		18,180			17,540			16,941			15,606			15,179

Operating Income^(a)		4,632			4,580			4,445			4,069			3,689
Interest expense, net		(1,419	)		(1,552	)		(1,606	)		(1,518	)		(1,394	)
Other income (expense), net^(b)		35			11			497			(89	)		(99	)

Income before income taxes		3,248			3,039			3,336			2,462			2,196
Income tax provision^(c)		(1,217	)		(1,085	)		(1,177	)		(795	)		(883	)

Net income		2,031			1,954			2,159			1,667			1,313
Less: Net income attributable to noncontrolling interests		—			—			(4	)		(2	)		(5	)

Net income attributable to TWC shareholders	$	2,031		$	1,954		$	2,155		$	1,665		$	1,308


Net income per common share attributable to TWC common shareholders:
Basic	$	7.21		$	6.76		$	6.97		$	5.02		$	3.67

Diluted	$	7.17		$	6.70		$	6.90		$	4.97		$	3.64


Average common shares outstanding:
Basic		279.3			287.6			307.8			329.7			354.2

Diluted		283.0			291.7			312.4			335.3			359.5


Cash dividends declared per share	$	3.00		$	2.60		$	2.24		$	1.92		$	1.60

^(a)

Costs and expenses and Operating Income include merger-related and restructuring costs of $225 million in 2014, $119 million in 2013, $115 million in 2012, $70 million in 2011 and $52 million in 2010. Costs and expenses and Operating Income in 2011 includes a $60 million impairment charge on wireless assets that will no longer be utilized.

^(b)

Other income (expense), net, includes income (losses) from equity-method investments of $33 million in 2014, $19 million in 2013, $454 million in 2012, $(88) million in 2011 and $(110) million in 2010. Income from equity-method investments in 2012 primarily consists of a pretax gain of $430 million associated with SpectrumCo’s sale of its advanced wireless spectrum licenses to Verizon Wireless. Other income (expense), net, in 2012 includes a $64 million gain on the sale of the Company’s investment in Clearwire.

^(c)

Income tax provision in 2014 includes a benefit of $24 million as a result of the passage of the New York State budget during the first quarter of 2014 that, in part, lowers the New York State business tax rate beginning in 2016. Income tax provision in 2013 includes (i) a benefit of $77 million primarily related to changes in the tax rate applied to calculate the Company’s net deferred income tax liability as a result of changes in state tax apportionment factors and (ii) a benefit of $27 million resulting from income tax reform legislation enacted in North Carolina, which, along with other changes, phases in a reduction in North Carolina’s corporate income tax rate over several years. Income tax provision in 2012 includes (i) a benefit of $63 million related to a change in the tax rate applied to calculate the Company’s net deferred income tax liability as a result of an internal reorganization effective on September 30, 2012, (ii) a benefit of $47 million primarily related to a California state tax law change, (iii) a benefit of $46 million related to the reversal of a valuation allowance against a deferred income tax asset associated with the Company’s investment in Clearwire and (iv) a charge of $15 million related to the recording of a deferred income tax liability associated with a partnership basis difference. During the fourth quarter of 2011, TWC completed its income tax returns for the 2010 taxable year, its first full-year income tax returns subsequent to the Company’s separation from Time Warner, reflecting the income tax positions and state tax apportionments of TWC as a standalone taxpayer. Based on these returns, the Company concluded that an approximate 65 basis point change in the estimate of the effective tax rate applied to calculate its net deferred income tax liability was required. As a result, TWC recorded a noncash income tax benefit of $178 million during 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 upon the exercise of TWC stock options or vesting of TWC RSUs. Income tax provision in 2010 includes net income tax expense of $68 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 upon the exercise of TWC stock options or vesting of TWC RSUs.

129

TIME WARNER CABLE INC.

SELECTED FINANCIAL INFORMATION—(Continued)


	December 31,
	2014		2013		2012		2011		2010
	(in millions)
Selected Balance Sheet Information:
Cash and equivalents	$	707	$	525	$	3,304	$	5,177	$	3,047
Total assets		48,501		48,273		49,809		48,276		45,822
Total debt^(a)		23,718		25,052		26,689		26,442		23,121
Mandatorily redeemable preferred equity		—		—		300		300		300

^(a)	Total debt includes $1.017 billion, $1.767 billion, $1.518 billion and $2.122 billion of debt due within one year as of December 31, 2014, 2013, 2012 and 2011, respectively.

130

TIME WARNER CABLE INC.

QUARTERLY FINANCIAL INFORMATION

(Unaudited)


	Quarter Ended
	March 31,		June 30,		September 30,		December 31,
	(in millions, except per share data)
2014^(a)
Revenue	$	5,582	$	5,726	$	5,714	$	5,790
Operating Income		1,092		1,163		1,151		1,226
Net income		479		499		499		554
Net income attributable to TWC shareholders		479		499		499		554
Net income per common share attributable to TWC common shareholders:
Basic^(b)		1.71		1.77		1.77		1.96
Diluted^(b)		1.70		1.76		1.76		1.95
Average common shares outstanding:
Basic		277.8		278.8		279.8		280.6
Diluted		281.8		282.4		283.5		284.2
Common stock—high		147.28		148.20		155.32		155.95
Common stock—low		130.53		132.58		142.90		128.78
Cash dividends declared per share		0.75		0.75		0.75		0.75

2013^(a)
Revenue	$	5,475	$	5,550	$	5,518	$	5,577
Operating Income		1,060		1,187		1,160		1,173
Net income		401		481		532		540
Net income attributable to TWC shareholders		401		481		532		540
Net income per common share attributable to TWC common shareholders:
Basic^(b)		1.35		1.65		1.86		1.92
Diluted^(b)		1.34		1.64		1.84		1.89
Average common shares outstanding:
Basic		295.1		289.6		285.0		280.8
Diluted		299.4		293.3		289.0		285.2
Common stock—high		102.00		113.06		120.93		139.85
Common stock—low		84.57		89.81		106.01		108.88
Cash dividends declared per share		0.65		0.65		0.65		0.65

^(a)	The following items impact the comparability of results from period to period:

2014: During the quarter ended March 31, 2014, the Company recognized a $24 million income tax benefit as a result of the passage of the New York State budget during the first quarter of 2014 that, in part, lowers the New York State business tax rate beginning in 2016.

2013: During the quarter ended December 31, 2013, the Company recognized an income tax benefit of $45 million primarily related to changes in the tax rate applied to calculate the Company’s net deferred income tax liability as a result of changes to state tax apportionment factors. During the quarter ended September 30, 2013, the Company recognized (i) a $32 million income tax benefit primarily related to changes in the tax rate applied to calculate the Company’s net deferred income tax liability as a result of changes to state tax apportionment factors and (ii) a $27 million income tax benefit resulting from income tax reform legislation enacted in North Carolina, which, along with other changes, phases in a reduction in North Carolina’s corporate income tax rate over several years.

^(b)	Per common share amounts for the quarters and full years have each been calculated separately. Accordingly, quarterly amounts may not sum to the annual amounts due to differences in the weighted-average common shares outstanding during each period.

131

EXHIBIT INDEX

Pursuant to Item 601 of Regulation S-K


Exhibit Number		Description

2.1		Agreement and 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 and Exchange Commission (the “SEC”) on February 13, 2014 (the “TWC February 13, 2014 Form 8-K”)).
2.2		Voting Agreement, dated as of February 12, 2014 among TWC, Brian L. Roberts, BRCC Holdings LLC, Irrevocable Deed of Trust of Brian L. Roberts for Children and Other Issue dated June 10, 1998 and Irrevocable Deed of Trust of Ralph J. Roberts for Brian L. Roberts and Other Beneficiaries dated May 11, 1993 (incorporated herein by reference to Exhibit 2.2 to the TWC February 13, 2014 Form 8-K).
2.3		Agreement and Plan of Merger, dated as of August 15, 2011, by and among TWC, Derby Merger Sub Inc., Insight Communications Company, Inc. and Carlyle CIM Agent, L.L.C. (incorporated herein by reference to Exhibit 2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 and filed with the SEC on October 27, 2011).
3.1		Second Amended and Restated Certificate of Incorporation of TWC, as filed with the Secretary of State of the State of Delaware on March 12, 2009 (incorporated herein by reference to Exhibit 3.1 to Amendment No. 1 to TWC’s Registration Statement on Form 8-A filed with the SEC on March 12, 2009 (the “TWC March 2009 Form 8-A”)).
3.2		Amendment to Second Amended and Restated Certificate of Incorporation of TWC, as filed with the Secretary of State of the State of Delaware on March 12, 2009 (incorporated herein by reference to Exhibit 3.2 to the TWC March 2009 Form 8-A).
3.3		By-laws of the Company, as amended through July 26, 2012 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated July 25, 2012 and filed with the SEC on July 31, 2012).
4.1		Indenture, dated as of April 30, 1992, as amended by the First Supplemental Indenture, dated as of June 30, 1992, among Time Warner Entertainment Company, L.P. (“TWE”), Time Warner Companies, Inc. (“TWCI”), certain of TWCI’s subsidiaries that are parties thereto and The Bank of New York, as Trustee (incorporated herein by reference to Exhibits 10(g) and 10(h) to TWCI’s Current Report on Form 8-K dated June 26, 1992 and filed with the SEC on July 15, 1992 (File No. 1-8637)).
4.2		Second Supplemental Indenture, dated as of December 9, 1992, among TWE, TWCI, certain of TWCI’s subsidiaries that are parties thereto and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.2 to Amendment No. 1 to TWE’s Registration Statement on Form S-4 dated and filed with the SEC on October 25, 1993 (Registration No. 33-67688) (the “TWE October 25, 1993 Registration Statement”)).
4.3		Third Supplemental Indenture, dated as of October 12, 1993, among TWE, TWCI, certain of TWCI’s subsidiaries that are parties thereto and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.3 to the TWE October 25, 1993 Registration Statement).
4.4		Fourth Supplemental Indenture, dated as of March 29, 1994, among TWE, TWCI, certain of TWCI’s subsidiaries that are parties thereto and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.4 to TWE’s Annual Report on Form 10-K for the year ended December 31, 1993 and filed with the SEC on March 30, 1994 (File No. 1-12878)).
4.5		Fifth Supplemental Indenture, dated as of December 28, 1994, among TWE, TWCI, certain of TWCI’s subsidiaries that are parties thereto and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.5 to TWE’s Annual Report on Form 10-K for the year ended December 31, 1994 and filed with the SEC on March 30, 1995 (File No. 1-12878)).

132


Exhibit Number		Description

4.6		Sixth Supplemental Indenture, dated as of September 29, 1997, among TWE, TWCI, certain of TWCI’s subsidiaries that are parties thereto and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.7 to Historic TW Inc.’s (“Historic TW”) Annual Report on Form 10-K for the year ended December 31, 1997 and filed with the SEC on March 25, 1998 (File No. 1-12259) (the “Time Warner 1997 Form 10-K”)).
4.7		Seventh Supplemental Indenture, dated as of December 29, 1997, among TWE, TWCI, certain of TWCI’s subsidiaries that are parties thereto and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.8 to the Time Warner 1997 Form 10-K).
4.8		Eighth Supplemental Indenture, dated as of December 9, 2003, among Historic TW, TWE, Warner Communications Inc. (“WCI”), American Television and Communications Corporation (“ATC”), the Company and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.10 to Time Warner Inc.’s (“Time Warner”) Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-15062)).
4.9		Ninth Supplemental Indenture, dated as of November 1, 2004, among Historic TW, TWE, Time Warner NY Cable Inc., WCI, ATC, the Company and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.1 to Time Warner’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-15062)).
4.10		Tenth Supplemental Indenture, dated as of October 18, 2006, among Historic TW, TWE, TW NY Cable Holding Inc. (“TW NY”), Time Warner NY Cable LLC (“TW NY Cable”), the Company, WCI, ATC and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.1 to Time Warner’s Current Report on Form 8-K dated and filed October 18, 2006 (File No. 1-15062)).
4.11		Eleventh Supplemental Indenture, dated as of November 2, 2006, among TWE, TW NY, the Company and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 99.1 to Time Warner’s Current Report on Form 8-K dated and filed November 2, 2006 (File No. 1-15062)).
4.12		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, as trustee, supplementing the Indenture dated April 30, 1992, as amended (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated September 30, 2012 and filed with the SEC on October 1, 2012 (the “TWC September 30, 2012 Form 8-K”)).
4.13		$3.5 billion Five-Year Revolving Credit Agreement, dated as of April 27, 2012, among the Company, as Borrower, the Lenders from time to time party thereto, Citibank, N.A. as Administrative Agent, BNP Paribas, Deutsche Bank Securities Inc. and Wells Fargo Bank, National Association, as Co-Syndication Agents, and Barclays Bank PLC, JPMorgan Chase Bank, N.A., Mizuho Corporate Bank, LTD., RBC Capital Markets, Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, LTD. and The Royal Bank of Scotland plc, as Co-Documentation Agents, with associated Guarantees (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated April 27, 2012 and filed with the SEC on May 2, 2012).
4.14		Amendment and Joinder to Guarantee, dated as of September 30, 2012, by TWCE, TW NY and TWC Internet Holdings II, in favor of Citibank, N.A., as Administrative Agent for the lenders, parties to the $3.5 billion five-year credit agreement, dated as of April 27, 2012, by and among, the Company, the lenders party thereto, Citibank, N.A., as Administrative Agent, BNP Paribas, Deutsche Bank Securities Inc. and Wells Fargo Bank, National Association, as Co-Syndication Agents, and Barclays Bank PLC, JPMorgan Chase Bank, N.A., Mizuho Corporate Bank, LTD., RBC Capital Markets, Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, LTD. and The Royal Bank of Scotland plc, as Co-Documentation Agents (incorporated herein by reference to Exhibit 4.3 to the TWC September 30, 2012 Form 8-K).

133


Exhibit Number		Description

4.15		Indenture, dated as of April 9, 2007, among the Company, TW NY, TWE and The Bank of New York, as trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 4, 2007 and filed with the SEC on April 9, 2007 (the “TWC April 4, 2007 Form 8-K”)).
4.16		First Supplemental Indenture, dated as of April 9, 2007, among 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).
4.17		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, as trustee, supplementing the Indenture dated April 9, 2007, as amended (incorporated herein by reference to Exhibit 4.1 to the TWC September 30, 2012 Form 8-K).
4.18		Form of 5.85% Exchange Notes due 2017 (included as Exhibit B to the First Supplemental Indenture incorporated herein by reference to Exhibit 4.2 to the TWC April 4, 2007 Form 8-K).
4.19		Form of 6.55% Exchange Debentures due 2037 (included as Exhibit C to the First Supplemental Indenture incorporated herein by reference to Exhibit 4.2 to the TWC April 4, 2007 Form 8-K).
4.20		Form of 6.75% Notes due 2018 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 16, 2008 and filed with the SEC on June 19, 2008 (the “TWC June 16, 2008 Form 8-K”)).
4.21		Form of 7.30% Debentures due 2038 (incorporated herein by reference to Exhibit 4.3 to the TWC June 16, 2008 Form 8-K).
4.22		Form of 8.75% Notes due 2019 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated November 13, 2008 and filed with the SEC on November 18, 2008).
4.23		Form of 8.25% Notes due 2019 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated March 23, 2009 and filed with the SEC on March 26, 2009).
4.24		Form of 6.75% Debentures due 2039 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 24, 2009 and filed with the SEC on June 29, 2009).
4.25		Form of 3.5% Notes due 2015 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated December 8, 2009 and filed with the SEC on December 11, 2009 (the “TWC December 8, 2009 Form 8-K”)).
4.26		Form of 5.0% Notes due 2020 (incorporated herein by reference to Exhibit 4.2 to the TWC December 8, 2009 Form 8-K).
4.27		Form of 4.125% Notes due 2021 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated November 9, 2010 and filed with the SEC on November 15, 2010 (the “TWC November 9, 2010 Form 8-K”)).
4.28		Form of 5.875% Debentures due 2040 (incorporated herein by reference to Exhibit 4.2 to the TWC November 9, 2010 Form 8-K).
4.29		Form of 5.75% Note due 2031 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated and filed with the SEC on May 26, 2011).
4.30		Form of 4% Note due 2021 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated September 7, 2011 and filed with the SEC on September 12, 2011 (the “TWC September 7, 2011 Form 8-K”)).
4.31		Form of 5.5% Debenture due 2041 (incorporated herein by reference to Exhibit 4.2 to the TWC September 7, 2011 Form 8-K).
4.32		Form of 4.5% Debenture due 2042 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 7, 2012 and filed with the SEC on August 10, 2012).
4.33		Form of 5.25% Note due 2042 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated and filed with the SEC on June 27, 2012).

134


Exhibit Number		Description

10.1		Amended and Restated Agreement of Limited Partnership of TWE, dated as of March 31, 2003, by and among the Company, TWE Holdings I Trust (“Comcast Trust I”), ATC, Comcast Corporation and Time Warner (the “TWE Limited Partnership Agreement”) (incorporated herein by reference to Exhibit 3.3 to Time Warner’s Current Report on Form 8-K dated March 28, 2003 and filed with the SEC on April 14, 2003 (File No. 1-15062) (the “Time Warner March 28, 2003 Form 8-K”)).
10.2		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 Report on Form 10-K for the year ended December 31, 2009 (the “TWC 2009 Form 10-K”)).
10.3		Contribution Agreement, dated as of September 9, 1994, among TWE, Advance Publications, Inc. (“Advance Publications”), Newhouse Broadcasting Corporation (“Newhouse”), Advance/Newhouse Partnership and Time Warner Entertainment-Advance/Newhouse Partnership (“TWE-A/N”) (incorporated herein by reference to Exhibit 10(a) to TWE’s Current Report on Form 8-K dated September 9, 1994 and filed with the SEC on September 21, 1994 (File No. 1-12878)).
10.4		Amended and Restated Transaction Agreement, dated as of October 27, 1997, among Advance Publications, Newhouse, Advance/Newhouse Partnership, TWE, TW Holding Co. and TWE-A/N (incorporated herein by reference to Exhibit 99(c) to Historic TW’s Current Report on Form 8-K dated October 27, 1997 and filed with the SEC on November 5, 1997 (File No. 1-12259)).
10.5		Transaction Agreement No. 2, dated as of June 23, 1998, among Advance Publications, Newhouse, Advance/Newhouse Partnership, TWE, Paragon Communications (“Paragon”) and TWE-A/N (incorporated herein by reference to Exhibit 10.38 to Historic TW’s Annual Report on Form 10-K for the year ended December 31, 1998 and filed with the SEC on March 26, 1999 (File No. 1-12259) (the “Time Warner 1998 Form 10-K”)).
10.6		Transaction Agreement No. 3, dated as of September 15, 1998, among Advance Publications, Newhouse, Advance/Newhouse Partnership, TWE, Paragon and TWE-A/N (incorporated herein by reference to Exhibit 10.39 to the Time Warner 1998 Form 10-K).
10.7		Amended and Restated Transaction Agreement No. 4, dated as of February 1, 2001, among Advance Publications, Newhouse, Advance/Newhouse Partnership, TWE, Paragon and TWE-A/N (incorporated herein by reference to Exhibit 10.53 to Time Warner’s Transition Report on Form 10-K for the year ended December 31, 2000 and filed with the SEC on March 27, 2001 (File No. 1-15062)).
10.8		Master Transaction Agreement, dated as of August 1, 2002, by and among TWE-A/N, TWE, Paragon and Advance/Newhouse Partnership (incorporated herein by reference to Exhibit 10.1 to Time Warner’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 and filed with the SEC on August 14, 2002 (File No. 1-15062)).
10.9		Third Amended and Restated Partnership Agreement of TWE-A/N, dated as of December 31, 2002, among TWE, Paragon and Advance/Newhouse Partnership (incorporated herein by reference to Exhibit 99.1 to TWE’s Current Report on Form 8-K dated December 31, 2002 and filed with the SEC on January 14, 2003 (File No. 1-12878) (the “TWE December 31, 2002 Form 8-K”)).
10.10		Consent and Agreement, dated as of December 31, 2002, among TWE-A/N, TWE, Paragon, Advance/Newhouse Partnership, TWEAN Subsidiary LLC and JP Morgan Chase Bank (incorporated herein by reference to Exhibit 99.2 to the TWE December 31, 2002 Form 8-K).
10.11		Pledge Agreement, dated December 31, 2002, among TWE-A/N, Advance/Newhouse Partnership, TWEAN Subsidiary LLC and JP Morgan Chase Bank (incorporated herein by reference to Exhibit 99.3 to the TWE December 31, 2002 Form 8-K).
10.12		Separation Agreement, dated May 20, 2008, among Time Warner, the Company, TWE, TW NY, WCI, Historic TW and ATC (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated May 20, 2008 and filed with the SEC on May 27, 2008 (the “TWC May 20, 2008 Form 8-K”)).

135


Exhibit Number		Description

10.13		Second Amended and Restated Tax Matters Agreement, dated May 20, 2008, between the Company and Time Warner (incorporated herein by reference to Exhibit 99.2 to the TWC May 20, 2008 Form 8-K).
10.14		Employment Agreement, entered into on, and effective as of, July 25, 2013, between the Company and Robert D. Marcus (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).
10.15		Employment Agreement, effective as of February 16, 2012, between Time Warner Cable Inc. and Marc Lawrence-Apfelbaum (incorporated herein by reference to Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 and filed with the SEC on April 26, 2012).
10.16		Employment Agreement, effective as of May 2, 2013, between the Company and Arthur T. Minson, Jr. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 29, 2013 and filed with the SEC on April 30, 2013).
10.17		Employment Agreement, dated December 4, 2013 and effective as of January 13, 2014, between the Company and Dinesh C. Jain (incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated December 4, 2013 and filed with the SEC on December 6, 2013).
10.18		Time Warner Cable Inc. 2006 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.45 to the Company’s Current Report on Form 8-K dated February 13, 2007 and filed with the SEC on February 13, 2007).
10.19		Time Warner Cable Inc. 2006 Stock Incentive Plan, as amended, effective March 12, 2009 (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009).
10.20		Time Warner Cable Inc. 2011 Stock Incentive Plan (incorporated herein by reference to Annex A to TWC’s definitive Proxy Statement dated April 6, 2011 and filed with the SEC on April 6, 2011).
10.21		Time Warner Cable Inc. 2012 Annual Bonus Plan (incorporated by reference to Annex A to the Company’s definitive Proxy Statement dated April 3, 2012 and filed with the SEC on April 3, 2012).
10.22		Form of Non-Qualified Stock Option Agreement, used through 2009 (incorporated herein by reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006).
10.23		Form of Non-Qualified Stock Option Agreement, used commencing in 2010 (incorporated herein by reference to Exhibit 10.50 to the TWC 2009 Form 10-K).
10.24		Form of Non-Qualified Stock-Option Agreement, used commencing June 30, 2011 (incorporated herein by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (the “TWC 2011 Form 10-K”)).
10.25		Form of Non-Qualified Stock-Option Agreement, used commencing in 2013 (incorporated herein by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (the “TWC 2012 Form 10-K”)).
10.26		Form of Performance-Based Non-Qualified Stock Option Agreement, used commencing in 2011 (incorporated herein by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “TWC 2010 Form 10-K”)).
10.27		Form of Performance-Based Non-Qualified Stock Option Agreement, used commencing in 2012 (incorporated herein by reference to Exhibit 10.57 to the TWC 2011 Form 10-K).
10.28		Form of Performance-Based Non-Qualified Stock Option Agreement, used commencing in 2013 (incorporated herein by reference to Exhibit 10.50 to the TWC 2012 Form 10-K).
10.29		Form of Restricted Stock Units Agreement, as amended through December 14, 2007, used through 2009 (incorporated herein by reference to Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (the “TWC 2007 Form 10-K”)).
10.30		Form of Restricted Stock Units Agreement, used commencing in 2010 (incorporated herein by reference to Exhibit 10.52 to the TWC 2009 Form 10-K).

136


Exhibit Number		Description

10.31		Addendum to Restricted Stock Units Agreement (applicable to certain officers), used commencing in 2010 (incorporated herein by reference to Exhibit 10.53 to the TWC 2009 Form 10-K).
10.32		Form of Restricted Stock Units Agreement, used commencing in 2013 (incorporated herein by reference to Exhibit 10.54 to the TWC 2012 Form 10-K).
10.33		Form of Restricted Stock Units Agreement and Addendum thereto, used commencing in 2014 (incorporated herein by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 (the “TWC 2013 Form 10-K”)).
10.34		Form of Special Restricted Stock Units Agreement (2015), Notice of Grant and Addendum thereto (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 and filed with the SEC on April 24, 2014 (the “TWC March 31, 2014 Form 10-Q”)).
10.35		Form of Special Restricted Stock Units Agreement (2016), Notice of Grant and Addendum thereto (incorporated herein by reference to Exhibit 10.4 to the TWC March 31, 2014 Form 10-Q).
10.36		Form of Performance-Based Restricted Stock Units Agreement and Addendum thereto, used commencing in 2011 (incorporated herein by reference to Exhibit 10.55 to the TWC 2010 Form 10-K).
10.37		Form of Performance-Based Restricted Stock Units Agreement and Addendum thereto, used commencing in 2012 (incorporated herein by reference to Exhibit 10.63 to the TWC 2011 Form 10-K).
10.38		Form of Performance-Based Restricted Stock Units Agreement, used commencing in 2013 (incorporated herein by reference to Exhibit 10.57 to the TWC 2012 Form 10-K).
10.39		Form of Performance-Based Restricted Stock Units Agreement, used commencing in 2014 (incorporated herein by reference to Exhibit 10.48 to the TWC 2013 Form 10-K).
10.40		Form of Restricted Stock Units Agreement for Non-Employee Directors, as amended through December 14, 2007, used through 2009 (incorporated by reference to Exhibit 10.41 of the TWC 2007 Form 10-K).
10.41		Form of Restricted Stock Units Agreement for Non-Employee Directors, used commencing in 2010 (incorporated herein by reference to Exhibit 10.55 of the TWC 2009 Form 10-K).
10.42		Form of Notices of Grant of Restricted Stock Units for Non-Employee Directors, used commencing in 2011 (incorporated here by reference to Exhibit 10.58 to the TWC 2010 Form 10-K).
10.43		Form of Restricted Stock Units Agreement for Non-Employee Directors, used commencing in 2012 (incorporated herein by reference to Exhibit 10.67 to the TWC 2011 Form 10-K).
10.44		Form of Deferred Stock Units Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 10.48 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).
10.45		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).
10.46		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 (with Addendum) (incorporated herein by reference to Exhibit 10.55 to the TWC 2013 Form 10-K).
10.47		Description of Director Compensation (incorporated herein by reference to the section titled “Director Compensation” in the Company’s Proxy Statement dated April 29, 2014).
10.48		Letter dated January 28, 2015 among Comcast Corporation, Tango Acquisition Sub, Inc. and TWC (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated January 28, 2015 and filed with the SEC on January 29, 2015).
10.49		Consent dated as of April 25, 2014 between Comcast Corporation and Time Warner Cable Inc. (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated April 25, 2014 and filed with the SEC on April 28, 2014).
21*		Subsidiaries of the Company.
23*		Consent of Ernst & Young LLP.

137


Exhibit Number		Description

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
32†		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
101		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, (ii) Consolidated Statement of Operations for the years ended December 31, 2014, 2013 and 2012, (iii) Consolidated Statement of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012, (iv) Consolidated Statement of Cash Flows for the years ended December 31, 2014, 2013 and 2012, (v) Consolidated Statement of Equity for the years ended December 31, 2014, 2013 and 2012 and (vi) Notes to Consolidated Financial Statements.

*	Filed herewith.

†

This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Company specifically incorporates it by reference.

138

SPECTRUM MANAGEMENT HOLDING COMPANY, LLC - FORM 10-K - February 13, 2015

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