UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-33335

 

TIME WARNER CABLE INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		84-1496755 (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)

       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 o

       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 o

       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. (Check one):

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

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

		Shares Outstanding
Description of Class		as of October 29, 2010
Common Stock – $.01 par value		355,733,102

 

 

TIME WARNER CABLE INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION

		Page
PART I. FINANCIAL INFORMATION
Management’s Discussion and Analysis of Results of Operations and Financial Condition			1
Item 4. Controls and Procedures			21
Consolidated Balance Sheet as of September 30, 2010 and December 31, 2009			22
Consolidated Statement of Operations for the Three and Nine Months Ended September 30, 2010 and 2009			23
Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2010 and 2009			24
Consolidated Statement of Equity for the Nine Months Ended September 30, 2010 and 2009			25
Notes to Consolidated Financial Statements			26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			50
Item 1A. Risk Factors			50
Item 5. Other Information			50
Item 6. Exhibits			51
EX-4
EX-12
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

TIME WARNER CABLE INC.

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, current 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 recent developments the Company believes are important in understanding the results of operations and financial condition or in understanding anticipated future trends.

•

Financial statement presentation. This section 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 and nine months ended September 30, 2010.

•

Financial condition and liquidity. This section provides an analysis of the Company’s financial condition as of September 30, 2010 and cash flows for the nine months ended September 30, 2010.

•

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 susceptible to uncertainty and changes in circumstances. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”) for a discussion of the risk factors applicable to the Company.

OVERVIEW

       TWC is the second-largest cable operator in the U.S., with technologically advanced, well-clustered systems located mainly in five geographic areas – New York State (including New York City), the Carolinas, Ohio, Southern California (including Los Angeles) and Texas. As of September 30, 2010, TWC served approximately 14.4 million residential and commercial customers who subscribed to one or more of its three primary subscription services – video, high-speed data and voice – totaling approximately 26.7 million primary service units.

       TWC offers video, high-speed data and voice services over its broadband cable systems to residential and commercial customers. TWC markets its services separately and in “bundled” packages of multiple services and features. As of September 30, 2010, 59.4% of TWC’s residential and commercial customers subscribed to two or more of its primary services, including 25.4% of its customers who subscribed to all three primary services. TWC also sells advertising to a variety of national, regional and local advertising customers.

       Video generates the largest share of TWC’s revenues and, as of September 30, 2010, TWC had approximately 12.6 million video subscribers, of which approximately 9.0 million received digital video signals. TWC believes it will continue to increase video revenues for the foreseeable future through the offering of incremental video services (e.g., digital video recorder (“DVR”) service and additional programming tiers), as well as through equipment rentals and price increases; however, future video revenue growth rates will depend on video subscriber and penetration levels, competition, regulation, pricing and the state of the economy. TWC also offers video services to business customers and, of the Company’s 12.6 million video subscribers as of September 30, 2010, 165,000 were commercial video subscribers. Video programming costs represent a major component of TWC’s expenses and are expected to continue to increase, reflecting rate increases on existing programming services, costs associated with retransmission consent agreements, growth in video subscribers taking tiers of service with more channels and the expansion of service offerings (e.g., new network channels). TWC expects that its video programming costs as a percentage of video revenues will continue to increase as increases in programming costs outpace growth in video revenues.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       As of September 30, 2010, TWC had approximately 9.4 million residential high-speed data subscribers and 324,000 commercial high-speed data subscribers. TWC’s commercial high-speed data services include high-speed data, networking and transport services. TWC expects continued growth in high-speed data subscribers and revenues for the foreseeable future; however, future high-speed data subscriber and revenue growth rates will depend on high-speed data penetration levels, competition, regulation, pricing, the rate of wireless substitution of wireline high-speed data service and the state of the economy.

       In the fourth quarter of 2009, TWC began offering a wireless mobile broadband service in several cities and, as of September 30, 2010, the Company had 10,000 wireless mobile broadband subscribers. The Company estimates that it will incur start up losses of approximately $50 million during 2010 in connection with the deployment of this service, of which approximately $15 million and $30 million were incurred during the three and nine months ended September 30, 2010, respectively.

       As of September 30, 2010, TWC had approximately 4.3 million residential Digital Phone subscribers. TWC also offers its commercial Digital Phone service, Business Class Phone, in nearly all of its operating areas and had 102,000 commercial Digital Phone subscribers as of September 30, 2010. TWC expects continued increases in Digital Phone subscribers and revenues for the foreseeable future; however, future Digital Phone subscriber and revenue growth rates will depend on Digital Phone penetration levels, competition, regulation, pricing, the rate of wireless substitution of wireline phone service and the state of the economy.

       TWC faces intense competition for customers from a variety of alternative communications, information and entertainment delivery sources. TWC competes with incumbent local telephone companies, including AT&T Inc. and Verizon Communications Inc., across each of its primary services. Some of these telephone companies 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 services also faces competition from other companies that provide services on a stand-alone basis. TWC’s video service faces competition from direct broadcast satellite services, and increasingly from companies that deliver content to consumers over the Internet. TWC’s high-speed data service faces competition from wireless data providers, and competition in voice service is increasing as more homes in the U.S. are replacing their wireline telephone service with wireless service or “over-the-top” phone service, such as that provided by Vonage or Skype. Additionally, technological advances and product innovations have increased and will likely continue to increase the number of alternatives available to TWC’s customers and potential customers, further intensifying competition. The more competitive environment may negatively affect the growth of primary service units and average monthly subscription revenues per primary service unit and, additionally, may increase TWC’s cost to obtain certain video programming.

       TWC’s business is also affected by the economic environment and, in particular, trends in new home formation, housing vacancy rates, unemployment rates and consumer spending levels. The Company believes that the challenging economic environment since 2008 has negatively affected its financial and subscriber growth.

       As of September 30, 2010, the Company had approximately $6.9 billion of unused committed financial capacity, including cash and equivalents and availability under the Company’s $5.875 billion senior unsecured five-year revolving credit facility (the “$5.875 billion Revolving Credit Facility”), which, as of September 30, 2010, had no outstanding borrowings and supported no outstanding borrowings under the Company’s commercial paper program. As discussed below in “Recent Developments—$4.0 Billion Revolving Credit Facility,” on November 3, 2010, the Company entered into a credit agreement for a $4.0 billion senior unsecured three-year revolving credit facility provided by a group of major banks and other financial institutions maturing in November 2013 (the “$4.0 billion Revolving Credit Facility”), and the Company’s $5.875 billion Revolving Credit Facility, scheduled to mature in February 2011, was terminated. Had the $4.0 billion Revolving Credit Facility been in place (and the $5.875 billion Revolving Credit Facility been terminated) as of September 30, 2010, the Company’s unused committed financial capacity would have been reduced by approximately $1.9 billion. Management believes that cash generated by or available to TWC, after considering the $4.0 billion Revolving Credit Facility and related termination of the $5.875 billion Revolving Credit Facility, should be sufficient to fund its capital and liquidity needs for the foreseeable future, including quarterly dividend payments and common stock repurchases. See “Financial Condition and Liquidity” for further details regarding the Company’s committed financial capacity.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Recent Developments

Common Stock Repurchase Program

       On October 29, 2010, TWC’s Board of Directors authorized a common stock repurchase program that allows TWC to repurchase up to an aggregate of $4.0 billion of its common stock. Purchases under this stock repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.

$4.0 Billion Revolving Credit Facility

       On November 3, 2010, the Company entered into the $4.0 billion Revolving Credit Facility and the Company’s unsecured commercial paper program was reduced from $6.0 billion to $4.0 billion. The Company’s obligations under the $4.0 billion Revolving Credit Facility are guaranteed by its subsidiaries, Time Warner Entertainment Company, L.P. (“TWE”) and TW NY Cable Holding Inc. (“TW NY”). Borrowings under the $4.0 billion Revolving Credit Facility bear interest at a rate based on the credit rating of TWC, which rate was initially LIBOR plus 1.25% per annum. In addition, TWC is required to pay a facility fee on the aggregate commitments under the $4.0 billion Revolving Credit Facility at a rate determined by the credit rating of TWC, which rate was initially 0.25% per annum. TWC may also incur an additional usage fee of 0.25% per annum on the outstanding loans and other extensions of credit under the $4.0 billion Revolving Credit Facility if and when such amounts exceed 25% of the aggregate commitments thereunder. The $4.0 billion 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 $4.0 billion Revolving Credit Facility contains conditions, covenants, representations and warranties and events of default (with customary grace periods, as applicable) substantially similar to the conditions, covenants, representations and warranties and events of default in the Company’s $5.875 billion Revolving Credit Facility, including 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. The $4.0 billion Revolving Credit Facility does not contain any: credit ratings-based defaults or covenants; ongoing covenants or representations specifically relating to a material adverse change in TWC’s financial condition or results of operations; or borrowing restrictions due to material adverse changes in the Company’s business or market disruption. Borrowings under the $4.0 billion Revolving Credit Facility may be used for general corporate purposes, and unused credit is available to support borrowings under the Company’s $4.0 billion unsecured commercial paper program.

       In connection with the entry into the $4.0 billion Revolving Credit Facility, the Company’s $5.875 billion Revolving Credit Facility was terminated.

Common Stock Dividend

       Beginning in March 2010, the Company paid a quarterly cash dividend of $0.40 per share of TWC common stock to TWC stockholders on the respective record date. The total amount of dividends paid during the nine months ended September 30, 2010 was $432 million. On November 3, 2010, the Company’s Board of Directors declared a quarterly cash dividend of $0.40 per share of TWC common stock, payable in cash on December 15, 2010 to stockholders of record at the close of business on November 30, 2010.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Goodwill and Indefinite-lived Intangible Assets

       Historically, goodwill and intangible assets not subject to amortization (i.e., cable franchise rights) have been tested for impairment during the fourth quarter of each year (December 31) or earlier upon the occurrence of a triggering event. During the first quarter of 2010, the Company changed its annual impairment testing date to July 1 to coincide more closely with the Company’s annual preparation of long range projections (“LRPs”), which are a significant component used in the impairment analysis. Prior to the Company’s separation (the “Separation”) from Time Warner Inc. (“Time Warner”) (discussed further below), the Company’s LRPs were prepared during the fourth quarter of each year, consistent with Time Warner’s other business units. After the Separation, the Company began preparing its LRPs in the middle of each year. Accordingly, the Company believes the change in the annual impairment testing date to be preferable in its circumstances. This change is being applied on a prospective basis. The Company does not believe this change would have delayed, accelerated or avoided an impairment charge in prior periods.

       As discussed further in Note 3 to the accompanying consolidated financial statements, the Company determined that goodwill and cable franchise rights were not impaired during its annual impairment analysis performed as of July 1, 2010. To illustrate the extent that the fair value of the cable franchise rights exceeded their carrying value as of July 1, 2010, had the fair values of each of the cable franchise rights been lower by 20%, the Company still would not have recorded an impairment charge. Similarly, a decline in the fair values of the reporting units by up to 30% would not have resulted in any goodwill impairment charges.

FINANCIAL STATEMENT PRESENTATION

Revenues

       The Company’s revenues consist of Subscription and Advertising revenues. Subscription revenues consist of revenues from video, high-speed data and voice services.

       Video revenues include residential and commercial subscriber fees for the Company’s three main levels or “tiers” of video programming service—Basic Service Tier (“BST”), Expanded Basic Service Tier (or Cable Programming Service Tier) (“CPST”) and Digital Basic Service Tier (“DBT”), as well as fees for genre-based programming tiers, such as movie, sports and Spanish-language tiers. Video revenues also include related equipment rental charges, installation charges and fees collected on behalf of local franchising authorities and the Federal Communications Commission (the “FCC”). Additionally, video revenues include revenues from premium channels, transactional video-on-demand (e.g., events and movies) and DVR service. Several ancillary items are also included within video revenues, such as commissions earned on the sale of merchandise by home shopping networks and revenues from home security services.

       High-speed data revenues primarily include residential and commercial subscriber fees for the Company’s high-speed data and wireless mobile broadband services, along with related high-speed data home networking fees and installation charges. High-speed data revenues also include fees paid to TWC by (a) the Advance/Newhouse Partnership for the ability to distribute TWC’s Road Runner^TM high-speed data service (“Road Runner”) and TWC’s management of certain functions for the Advance/Newhouse Partnership, including, among others, programming and engineering, and (b) other distributors of TWC’s Road Runner high-speed data service. In addition, high-speed data revenues include fees received from third-party internet service providers (e.g., Earthlink) whose on-line services are provided to some of TWC’s customers. Commercial high-speed data revenues include amounts generated by the sale of commercial networking and transport services. These services include point-to-point transport services offered to wireless telephone providers (i.e., cell tower backhaul), Internet service providers and competitive carriers on a wholesale basis, as well as Metro Ethernet service.

       Voice revenues include subscriber fees from residential and commercial Digital Phone subscribers, along with related installation charges.

       Advertising revenues include the fees charged to local, regional and national advertising customers for advertising placed on the Company’s video and high-speed data services, as well as advertising inventory sold on behalf of other video service providers. Nearly all Advertising revenues are derived from advertising placed on video services.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Costs and Expenses

       Costs of revenues include the following costs directly associated with the delivery of services to subscribers or the maintenance of the Company’s delivery systems: video programming costs; high-speed data connectivity costs; voice network costs; wireless mobile broadband service costs; other service-related expenses, including non-administrative labor; franchise fees; and other related costs.

       Selling, general and administrative expenses include amounts not directly associated with the delivery of services to subscribers or the maintenance of the Company’s delivery systems, such as administrative labor costs, marketing expenses, bad debt expense, billing system charges, non-plant repair and maintenance costs and other administrative overhead costs.

Use of Operating Income (Loss) before Depreciation and Amortization and Free Cash Flow

       In discussing its 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 OIBDA and Free Cash Flow, which the Company defines as follows:

•

OIBDA (Operating Income (Loss) before Depreciation and Amortization) means Operating Income (Loss) before depreciation of tangible assets and amortization of intangible assets.

•

Free Cash Flow means cash provided by operating activities (as defined under GAAP) excluding the impact, if any, of cash provided or used by discontinued operations, plus any excess tax benefits from the exercise of stock options, less (i) capital expenditures, (ii) cash paid for other intangible assets, (iii) partnership distributions to third parties and (iv) principal payments on capital leases.

       Management uses OIBDA, among other measures, in evaluating the performance of the Company’s business because it eliminates the effects of (1) considerable amounts of noncash depreciation and amortization and (2) items not within the control of the Company’s operations managers (such as net income (loss) attributable to noncontrolling interests, income tax benefit (provision), other income (expense), net, and interest expense, net). Management believes that Free Cash Flow is an important indicator of the Company’s liquidity after the payment of cash taxes, interest and other cash items, including its ability to reduce net debt, pay dividends, repurchase common stock and make strategic investments. Performance measures derived from OIBDA are also used in the Company’s annual incentive compensation programs. In addition, both of these measures are commonly used by analysts, investors and others in evaluating the Company’s performance and liquidity.

       These measures have inherent limitations. For example, OIBDA does not reflect capital expenditures or the periodic costs of certain capitalized assets used in generating revenues. To compensate for such limitations, management evaluates performance through, among other measures, Free Cash Flow, which reflects capital expenditure decisions, and net income (loss) 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 share of OIBDA attributable to noncontrolling interests, 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 (loss) attributable to TWC shareholders. Free Cash Flow, a liquidity measure, does not reflect payments made in connection with investments and acquisitions, which reduce liquidity. To compensate for this limitation, management evaluates such investments and acquisitions through other measures such as return on investment analyses.

       These measures should be considered in addition to, not as substitutes for, the Company’s Operating Income (Loss), net income (loss) attributable to TWC shareholders and various cash flow measures (e.g., cash provided by operating activities), as well as other measures of financial performance and liquidity reported in accordance with GAAP, and may not be comparable to similarly titled measures used by other companies.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Basis of Presentation

Separation from Time Warner

       On March 12, 2009, TWC completed the Separation from Time Warner, which, prior to the Separation, owned approximately 84% of the common stock of TWC (representing a 90.6% voting interest) and a 12.43% non-voting common stock interest in TW NY, a subsidiary of TWC. As a result of the Separation, Time Warner no longer has an ownership interest in TWC or TW NY. Refer to the 2009 Form 10-K for additional information regarding the Separation.

Reclassifications

       Certain reclassifications have been made to the prior year financial information to conform to the current year presentation.

Recent Accounting Standards

       See Note 2 to the accompanying consolidated financial statements for accounting standards adopted in 2010 and recently issued accounting standards not yet adopted.

RESULTS OF OPERATIONS

Three and Nine Months Ended September 30, 2010 Compared to Three and Nine Months Ended September 30, 2009

       The following discussion provides an analysis of the Company’s results of operations and should be read in conjunction with the accompanying consolidated statement of operations, as well as the consolidated financial statements and notes thereto and MD&A included in the 2009 Form 10-K.

       Revenues. Revenues by major category were as follows (in millions):

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2010				2009				% Change				2010				2009				% Change
Subscription:
Video		$	2,743			$	2,698				1.7	%		$	8,264			$	8,071				2.4	%
High-speed data			1,255				1,138				10.3	%			3,680				3,362				9.5	%
Voice			513				480				6.9	%			1,511				1,402				7.8	%
Total Subscription			4,511				4,316				4.5	%			13,455				12,835				4.8	%
Advertising			223				182				22.5	%			612				501				22.2	%
Total		$	4,734			$	4,498				5.2	%		$	14,067			$	13,336				5.5	%

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       Selected subscriber-related statistics were as follows (in thousands):

		September 30,
		2010				2009				% Change
Video(a)			12,551				12,964				(3.2%)
Residential high-speed data(b)(c)			9,386				8,874				5.8	%
Commercial high-speed data(b)(c)			324				293				10.6	%
Residential Digital Phone(c)(d)			4,324				4,078				6.0	%
Commercial Digital Phone(c)(d)			102				58				75.9	%
Primary service units(e)			26,687				26,267				1.6	%
Digital video(f)(g)			9,013				8,810				2.3	%
Revenue generating units(g)(h)			35,700				35,077				1.8	%
Customer relationships(g)(i)			14,438				14,627				(1.3%)
Double play(g)(j)			4,904				4,873				0.6	%
Triple play(g)(k)			3,672				3,384				8.5	%

       For the three months ended September 30, 2010, residential subscription revenues increased 3.5% to $4.224 billion and commercial subscription revenues increased 21.6% to $287 million. For the nine months ended September 30, 2010, residential subscription revenues increased 4.0% to $12.646 billion and commercial subscription revenues increased 20.4% to $809 million. Total subscription revenues increased 4.5% and 4.8% for the three and nine months ended September 30, 2010, respectively, as a result of increases in video, high-speed data and voice revenues.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       The increase in video revenues for the three and nine months ended September 30, 2010 was primarily due to video price increases, the continued growth of digital video subscribers and an increase in revenues from DVR service, which were partially offset by a decrease in video subscribers and, for the three months ended September 30, 2010, a decrease in transactional video-on-demand revenues. Commercial video revenues were $68 million and $199 million for the three and nine months ended September 30, 2010, respectively, compared to $65 million and $188 million for the three and nine months ended September 30, 2009, respectively. The major components of video revenues were as follows (in millions):

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2010				2009				% Change				2010				2009				% Change
Programming tiers(a)		$	1,803			$	1,800				0.2	%		$	5,436			$	5,398				0.7	%
Premium channels			216				219				(1.4%)				650				657				(1.1%)
Transactional video-on-demand			87				95				(8.4%)				282				281				0.4	%
Video equipment rental and installation charges			333				301				10.6	%			978				894				9.4	%
DVR service			146				128				14.1	%			434				379				14.5	%
Franchise and other fees(b)			123				119				3.4	%			370				356				3.9	%
Other			35				36				(2.8%)				114				106				7.5	%
Total		$	2,743			$	2,698				1.7	%		$	8,264			$	8,071				2.4	%

       High-speed data revenues increased primarily due to growth in high-speed data subscribers and, to a lesser extent, increases in average revenues per subscriber and other commercial service revenues (e.g., cell tower backhaul and Metro Ethernet revenues). Commercial high-speed data revenues were $185 million and $521 million for the three and nine months ended September 30, 2010, respectively, compared to $152 million and $436 million for the three and nine months ended September 30, 2009, respectively.

       The increase in voice revenues was due to growth in Digital Phone subscribers, partially offset by a decrease in average revenues per subscriber. Commercial voice revenues were $34 million and $89 million for the three and nine months ended September 30, 2010, respectively, compared to $19 million and $48 million for the three and nine months ended September 30, 2009, respectively.

       Average monthly subscription revenues (which includes residential and commercial video, high-speed data and voice revenues) per unit were as follows:

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2010				2009				% Change				2010				2009				% Change
Average monthly subscription revenues per:
Customer relationship(a)		$	104.06			$	98.34				5.8	%		$	102.95			$	97.48				5.6	%
Primary service unit			56.39				54.93				2.7	%			56.20				54.84				2.5	%

       Advertising revenues increased primarily due to higher revenues from regional, local and, to a lesser extent, national businesses, as well as growth in political advertising revenues. The Company expects that Advertising revenues will increase during the fourth quarter of 2010 as compared to 2009 primarily as a result of higher political advertising revenues.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       Costs of revenues. The major components of costs of revenues were as follows (in millions):

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2010				2009				% Change				2010				2009				% Change
Video programming		$	1,044			$	1,009				3.5	%		$	3,157			$	3,013				4.8	%
Employee(a)			666				657				1.4	%			1,956				1,950				0.3	%
High-speed data			37				33				12.1	%			103				99				4.0	%
Voice			168				161				4.3	%			497				470				5.7	%
Video franchise and other fees(b)			123				119				3.4	%			370				356				3.9	%
Other direct operating costs(a)			201				184				9.2	%			574				535				7.3	%
Total		$	2,239			$	2,163				3.5	%		$	6,657			$	6,423				3.6	%
Costs of revenues as a percentage of revenues			47.3%				48.1%								47.3%				48.2%

       For the three and nine months ended September 30, 2010, costs of revenues increased 3.5% and 3.6%, respectively, primarily related to increases in video programming and voice costs.

       The increase in video programming costs was primarily due to contractual rate increases and incremental costs associated with the continued retransmission of certain local broadcast stations, partially offset by a decline in video subscribers. Additionally, video programming costs for the three and nine months ended September 30, 2010 were reduced by approximately $15 million and $25 million, respectively, and video programming costs for both the three and nine months ended September 30, 2009 were increased by approximately $5 million due to changes in cost estimates for programming services carried without a contract, reversals of previously accrued audit reserves and certain contract settlements. Average programming costs per video subscriber increased 6.8% to $27.60 per month for the three months ended September 30, 2010 from $25.85 per month for the three months ended September 30, 2009. Average programming costs per video subscriber increased 7.4% to $27.55 per month for the nine months ended September 30, 2010 from $25.66 per month for the nine months ended September 30, 2009.

       Employee costs for the three and nine months ended September 30, 2010 increased primarily as a result of higher costs associated with commercial service-related employees, which, for the nine months ended September 30, 2010, were partially offset by a decline in residential service-related employee costs, primarily resulting from decreased connect and installation activity. Employee expense for both the three and nine months ended September 30, 2010 was also impacted by a decrease in pension expense, which, for the nine months ended September 30, 2010, was partially offset by higher employee medical expense.

       Voice costs consist of the direct costs associated with the delivery of voice services, including network connectivity costs. Voice costs for the three and nine months ended September 30, 2010 increased primarily due to growth in Digital Phone subscribers.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       Selling, general and administrative expenses. The components of selling, general and administrative expenses were as follows (in millions):

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2010				2009				% Change				2010				2009				% Change
Employee		$	313			$	284				10.2	%		$	936			$	863				8.5	%
Marketing			156				140				11.4	%			463				408				13.5	%
Bad debt(a)			37				38				(2.6%)				94				132				(28.8%)
Separation-related “make-up” equity award costs(b)			1				4				(75.0%)				5				6				(16.7%)
Other			274				250				9.6	%			780				728				7.1	%
Total		$	781			$	716				9.1	%		$	2,278			$	2,137				6.6	%

       Selling, general and administrative expenses for the three and nine months ended September 30, 2010 increased primarily as a result of increases in employee expenses (primarily due to higher headcount and compensation), marketing expenses and consulting and professional fees. For the nine months ended September 30, 2010, these increases were partially offset by a decrease in bad debt expense primarily due to improvements in collection efforts.

       Restructuring costs. The results include restructuring costs of $13 million and $44 million for the three and nine months ended September 30, 2010, respectively, and $14 million and $64 million for the three and nine months ended September 30, 2009, respectively, primarily related to headcount reductions, and, for the nine months ended September 30, 2010, the termination of a facility lease that occurred during the second quarter of 2010. During the first quarter of 2009, TWC began a significant restructuring, resulting in the elimination of approximately 1,300 positions during 2009, of which approximately 1,100 occurred during the first nine months of the year. During the nine months ended September 30, 2010, TWC eliminated approximately 700 additional positions as a result of this restructuring. The Company expects to incur additional restructuring costs of approximately $15 million during the fourth quarter of 2010.

       Gain on sale of cable systems. During the nine months ended September 30, 2009, the Company recovered $2 million of losses associated with the 2008 sale of certain non-core cable systems as a result of a post-closing purchase price adjustment.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       Reconciliation of OIBDA to Operating Income. The following table reconciles OIBDA to Operating Income. In addition, the table provides the components from Operating Income to net income attributable to TWC shareholders for purposes of the discussions that follow (in millions):

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2010				2009				% Change				2010				2009				% Change
OIBDA		$	1,701			$	1,605				6.0	%		$	5,088			$	4,714				7.9	%
Depreciation			(745	)			(713	)			4.5	%			(2,237	)			(2,105	)			6.3	%
Amortization			(29	)			(64	)			(54.7%)				(156	)			(183	)			(14.8%)
Operating Income			927				828				12.0	%			2,695				2,426				11.1	%
Interest expense, net			(346	)			(348	)			(0.6%)				(1,034	)			(974	)			6.2	%
Other expense, net			(25	)			(19	)			31.6	%			(58	)			(83	)			(30.1%)
Income before income taxes			556				461				20.6	%			1,603				1,369				17.1	%
Income tax provision			(193	)			(193	)			—				(683	)			(600	)			13.8	%
Net income			363				268				35.4	%			920				769				19.6	%
Less: Net income attributable to noncontrolling interests			(3	)			—			NM					(4	)			(21	)			(81.0%)
Net income attributable to TWC shareholders		$	360			$	268				34.3	%		$	916			$	748				22.5	%

       OIBDA. OIBDA for the three and nine months ended September 30, 2010 increased principally as a result of revenue growth, partially offset by higher costs of revenues and selling, general and administrative expenses, as discussed above.

       Depreciation. The increase in depreciation expense for the three and nine months ended September 30, 2010 was primarily associated with continued investments in customer premise equipment, scalable infrastructure and line extensions occurring during or subsequent to the comparable period in 2009.

       Amortization. The decrease in amortization expense for the three and nine months ended September 30, 2010 was primarily due to approximately $880 million of customer relationships acquired in the July 31, 2006 transactions with Adelphia Communications Corporation and Comcast Corporation that were fully amortized as of July 31, 2010. Amortization expense for the nine months ended September 30, 2009 included a benefit of approximately $13 million recorded to reduce excess amortization recorded in prior years.

       Operating Income. Operating Income for the three and nine months ended September 30, 2010 increased primarily due to the increase in OIBDA and the decrease in amortization expense, partially offset by the increase in depreciation expense, as discussed above.

       Interest expense, net. Interest expense, net, for the nine months ended September 30, 2010 increased primarily due to higher average debt outstanding during the first quarter of 2010 as compared to the first quarter of 2009. Interest expense, net, for the nine months ended September 30, 2009 included $13 million of debt issuance costs primarily related to upfront loan fees on a 364-day senior unsecured term loan facility entered into in 2008 in connection with the Separation, which were recognized as expense when the facility was repaid and terminated following the Company’s public debt issuance in March 2009.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

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

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Direct transaction costs related to the Separation(a)		$	—			$	—			$	—			$	(28	)
Loss from equity investments, net(b)			(27	)			(13	)			(68	)			(36	)
Investment in The Reserve Fund’s Primary Fund			1				—				1				(10	)
Other investment gains			—				—				—				3
Equity award reimbursement obligation to Time Warner(c)			(2	)			(5	)			5				(13	)
Other			3				(1	)			4				1
Other expense, net		$	(25	)		$	(19	)		$	(58	)		$	(83	)

       Income tax provision. For both the three months ended September 30, 2010 and 2009, the Company recorded income tax provisions of $193 million. For the nine months ended September 30, 2010 and 2009, the Company recorded income tax provisions of $683 million and $600 million, respectively. The effective tax rate was 34.7% and 41.9% for the three months ended September 30, 2010 and 2009, respectively, and 42.6% and 43.8% for the nine months ended September 30, 2010 and 2009, respectively.

       The income tax provision and the effective tax rates for the three and nine months ended September 30, 2010 benefited from adjustments of $23 million and $29 million, respectively, to the Company’s valuation allowance for deferred tax assets associated with an equity-method investment.

       The income tax provision and the effective tax rate for the nine months ended September 30, 2010 were also impacted by a net noncash charge of $68 million related to the reversal of previously recognized deferred income tax benefits primarily as a result of the expiration, on March 12, 2010, of vested Time Warner stock options held by TWC employees. As a result of the Separation on March 12, 2009, TWC employees who held stock options under Time Warner equity plans were treated as if their employment with Time Warner had been terminated without cause at the time of the Separation. In most cases, this treatment resulted in shortened exercise periods, generally one year from the date of Separation, for vested Time Warner stock options held by TWC employees.

       Vested Time Warner stock options held primarily by certain retirement-eligible TWC employees (pursuant to the terms of the award agreements) have exercise periods of up to five years from the date of the Separation and, as such, the Company estimates that it may incur additional noncash income tax expense of up to approximately $90 million through March 2014 upon the exercise or expiration of these stock options. This estimate and the timing of such charges are dependent on a number of variables related to Time Warner and TWC equity awards, including the respective stock prices and the timing of the exercise or expiration of stock options and restricted stock units.

       The income tax provision and the effective tax rate for the nine months ended September 30, 2009 were impacted by the passage of the California state budget during the first quarter of 2009 that, in part, changed the methodology of income tax apportionment in California. This tax law change resulted in an increase in state deferred tax liabilities and a corresponding noncash tax provision of $38 million, which was recorded in the first quarter of 2009. On October 19, 2010, legislation was enacted in California that reversed the changes in methodology of California income tax apportionment included in the 2009 California state budget. As a result, the Company expects that this tax law change will result in a decrease in state deferred tax liabilities and a corresponding noncash tax benefit of approximately $40 million, which will be recorded in the fourth quarter of 2010.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       Absent the impacts of the 2010 valuation allowance adjustments and the reversal of previously recognized deferred income tax benefits primarily resulting from the expiration of vested Time Warner stock options and the 2009 California tax law change, the effective tax rates would have been 39.2% and 41.9% for the three months ended September 30, 2010 and 2009, respectively, and 40.2% and 41.1% for the nine months ended September 30, 2010 and 2009, respectively.

       Net income attributable to noncontrolling interests. Net income attributable to noncontrolling interests for the nine months ended September 30, 2010 decreased principally due to changes in the ownership structure of the Company that occurred during the first quarter of 2009 in connection with the Separation.

       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 the three and nine months ended September 30, 2010 and 2009 (in millions, except per share data):

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2010				2009				% Change				2010				2009				% Change
Net income attributable to TWC shareholders		$	360			$	268				34.3	%		$	916			$	748				22.5	%
Net income per common share attributable to TWC common shareholders:
Basic		$	1.00			$	0.76				31.6	%		$	2.56			$	2.15				19.1	%
Diluted		$	1.00			$	0.76				31.6	%		$	2.55			$	2.14				19.2	%

       For the three and nine months ended September 30, 2010, net income attributable to TWC shareholders and net income per common share attributable to TWC common shareholders increased primarily due to an increase in Operating Income, which, for the nine months ended September 30, 2010, was partially offset by increases in income tax provision and interest expense, net, each as discussed above.

FINANCIAL CONDITION AND LIQUIDITY

       Management believes that cash generated by or available to TWC, after considering the $4.0 billion Revolving Credit Facility and related termination of the $5.875 billion Revolving Credit Facility, should be sufficient to fund its capital and liquidity needs for the foreseeable future, including quarterly dividend payments and common stock repurchases. TWC’s sources of cash include cash provided by operating activities, cash and equivalents on hand, borrowing capacity under its committed credit facility and commercial paper program, as well as access to capital markets.

       The Company generally invests its cash and equivalents in a combination of money market, government and treasury funds, as well as other similar instruments, 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. As of September 30, 2010, nearly all of the Company’s cash and equivalents was invested in money market funds, with no more than 20% invested in any one fund.

       TWC’s unused committed financial capacity was $6.853 billion as of September 30, 2010, reflecting $1.128 billion of cash and equivalents and $5.725 billion of available borrowing capacity under the Company’s $5.875 billion Revolving Credit Facility. As discussed in “Recent Developments—$4.0 Billion Revolving Credit Facility,” on November 3, 2010, the Company entered into the $4.0 billion Revolving Credit Facility and the $5.875 billion Revolving Credit Facility, scheduled to mature in February 2011, was terminated. Had the $4.0 billion Revolving Credit Facility been in place (and the $5.875 billion Revolving Credit Facility been terminated) as of September 30, 2010, the Company’s unused committed financial capacity would have been reduced by $1.875 billion.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Current Financial Condition

       As of September 30, 2010, the Company had $21.314 billion of debt, $1.128 billion of cash and equivalents (net debt of $20.186 billion, defined as total debt less cash and equivalents), $300 million of mandatorily redeemable non-voting Series A Preferred Equity Membership Units (the “TW NY Cable Preferred Membership Units”) issued by a subsidiary of TWC, Time Warner NY Cable LLC (“TW NY Cable”), and $9.425 billion of total TWC shareholders’ equity. As of December 31, 2009, the Company had $22.331 billion of debt, $1.048 billion of cash and equivalents (net debt of $21.283 billion), $300 million of TW NY Cable Preferred Membership Units and $8.685 billion of total TWC shareholders’ equity.

       The following table shows the significant items contributing to the change in net debt from December 31, 2009 to September 30, 2010 (in millions):

Balance as of December 31, 2009		$	21,283
Cash provided by operating activities			(3,774	)
Capital expenditures			2,148
Dividends paid			432
Increase in the fair value of debt subject to interest rate swap contracts(a)			252
All other, net			(155	)
Balance as of September 30, 2010		$	20,186

       In 2008, TWC filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (the “SEC”) that allows TWC to offer and sell from time to time senior and subordinated debt securities and debt warrants.

       On October 29, 2010, TWC’s Board of Directors authorized a common stock repurchase program that allows TWC to repurchase up to an aggregate of $4.0 billion of its common stock. Purchases under this stock repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.

       On November 3, 2010, the Company’s Board of Directors declared a quarterly cash dividend of $0.40 per share of TWC common stock, payable in cash on December 15, 2010 to stockholders of record at the close of business on November 30, 2010.

Cash Flows

       Cash and equivalents increased $80 million and decreased $4.943 billion for the nine months ended September 30, 2010 and 2009, respectively. Components of these changes are discussed below in more detail.

TIME WARNER CABLE INC.
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):

		Nine Months Ended
		September 30,
		2010				2009
OIBDA		$	5,088			$	4,714
Gain on sale of cable systems			—				(2	)
Noncash equity-based compensation			82				77
Net interest payments(a)			(1,068	)			(909	)
Pension plan contributions			(52	)			(129	)
Net income tax payments(b)			(360	)			(27	)
Net restructuring accruals			3				13
All other, net, including working capital changes			81				68
Cash provided by operating activities		$	3,774			$	3,805

       Cash provided by operating activities decreased from $3.805 billion for the nine months ended September 30, 2009 to $3.774 billion for the nine months ended September 30, 2010. This decrease was primarily related to increases in net income tax and interest payments, partially offset by an increase in OIBDA (as previously discussed) and the decrease in pension plan contributions.

       Net income tax payments for the nine months ended September 30, 2009 benefited from the impact of the accelerated depreciation deductions provided by the American Recovery and Reinvestment Act of 2009, partially offset by the reversal of a portion of similar benefits received in 2008 from the Economic Stimulus Act of 2008. These Acts provide for a first year bonus depreciation deduction of 50% of the cost of the Company’s qualified capital expenditures for the year.

       Net income tax payments for the nine months ended September 30, 2010 were impacted by the absence of bonus depreciation and the reversal of a portion of the bonus depreciation benefits received in 2008 and 2009. On September 27, 2010, the Small Business Jobs Act was enacted, which provides for a bonus depreciation deduction of 50% of the cost of the Company’s qualified capital expenditures during 2010. This legislation is applied retroactively to the beginning of 2010. As a result, the Company expects that it will not make any Federal income tax payments during the fourth quarter of 2010. Additionally, the Company expects that as a result of this legislation, it will have a Federal income tax receivable as of December 31, 2010, which will reduce net income tax payments in the first half of 2011.

       Net interest payments for the nine months ended September 30, 2010 increased primarily as a result of the timing of interest payments related to the public debt issuances in March, June and December 2009.

       The Company contributed $52 million to its funded and unfunded noncontributory defined benefit pension plans (the “pension plans”) during the nine months ended September 30, 2010, and may make additional discretionary cash contributions to its pension plans during the fourth quarter of 2010. See Note 9 to the accompanying consolidated financial statements for additional discussion of the Company’s pension plans.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

Investing Activities

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

		Nine Months Ended
		September 30,
		2010				2009
Acquisitions and investments, net of cash acquired and distributions received:
The Reserve Fund’s Primary Fund(a)		$	35			$	54
Sterling Entertainment Enterprises, LLC(b)			60				—
SpectrumCo(c)			—				(27	)
All other			(40	)			(21	)
Capital expenditures			(2,148	)			(2,287	)
Other investing activities			7				9
Cash used by investing activities		$	(2,086	)		$	(2,272	)

       Cash used by investing activities decreased from $2.272 billion for the nine months ended September 30, 2009 to $2.086 billion for the nine months ended September 30, 2010. This decrease was principally due to a decline in capital expenditures. The Company expects that capital expenditures will be less than $3.0 billion in 2010.

       TWC’s capital expenditures included the following major categories (in millions):

		Nine Months Ended
		September 30,
		2010				2009
Customer premise equipment(a)		$	868			$	951
Scalable infrastructure(b)			527				530
Line extensions(c)			263				215
Upgrades/rebuilds(d)			117				125
Support capital(e)			373				466
Total capital expenditures		$	2,148			$	2,287

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

     TWC incurs expenditures associated with the construction of its cable systems. Costs associated with the construction of transmission and distribution facilities are capitalized. TWC generally capitalizes expenditures for tangible fixed assets having a useful life of greater than one year. Capitalized costs include direct material, labor and overhead, as well as interest. Sales and marketing costs, as well as the costs of repairing or maintaining existing fixed assets, are expensed as incurred. With respect to customer premise equipment, which includes set-top boxes and high-speed data and telephone modems, TWC capitalizes installation costs 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. Depreciation on these assets is provided generally using the straight-line method over their estimated useful lives. For set-top boxes and modems, the useful life is 3 to 5 years, and, for distribution plant, the useful life is up to 16 years.

Financing Activities

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

		Nine Months Ended
		September 30,
		2010				2009
Borrowings (repayments), net(a)		$	(1,261	)		$	2,215
Borrowings			—				10,071
Repayments			(8	)			(7,877	)
Debt issuance costs			—				(26	)
Proceeds from exercise of stock options			86				2
Dividends paid			(432	)			—
Payment of special cash dividend			—				(10,856	)
Other financing activities			7				(5	)
Cash used by financing activities		$	(1,608	)		$	(6,476	)

       Cash used by financing activities decreased from $6.476 billion for the nine months ended September 30, 2009 to $1.608 billion for the nine months ended September 30, 2010. Cash used by financing activities for the nine months ended September 30, 2010 primarily included net repayments under the Company’s commercial paper program and the payment of quarterly cash dividends. Cash used by financing activities for the nine months ended September 30, 2009 primarily consisted of the payment of the special cash dividend in connection with the Separation, partially offset by the net proceeds of the public debt issuances in March and June 2009.

Free Cash Flow

       Reconciliation of cash provided by operating activities to Free Cash Flow. The following table reconciles cash provided by operating activities to Free Cash Flow (in millions):

		Nine Months Ended
		September 30,
		2010				2009
Cash provided by operating activities		$	3,774			$	3,805
Add: Excess tax benefit from exercise of stock options			15				—
Less:
Capital expenditures			(2,148	)			(2,287	)
Cash paid for other intangible assets			(21	)			(17	)
Other			(1	)			(5	)
Free Cash Flow		$	1,619			$	1,496

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       Free Cash Flow increased from $1.496 billion for the nine months ended September 30, 2009 to $1.619 billion for the nine months ended September 30, 2010, primarily as a result of a decrease in capital expenditures, as discussed above. The Company expects that Free Cash Flow in the fourth quarter of 2010 will benefit from the impact of bonus depreciation on net income tax payments, as discussed above. This benefit may be offset by fourth quarter 2010 contributions to the Company’s pension plans.

Outstanding Debt and Mandatorily Redeemable Preferred Equity and Available Financial Capacity

       Debt and mandatorily redeemable preferred equity as of September 30, 2010 and December 31, 2009 were as follows:

								Outstanding Balance as of
								September 30,				December 31,
		Maturity		Interest Rate				2010				2009
								(in millions)
TWC notes and debentures(a)		2012-2039			6.181%(b)			$	18,606			$	18,357
TWE notes and debentures(c)		2012-2033			7.518%(b)				2,705				2,702
Credit facilities and commercial paper program(d)(e)		2011							—				1,261
Capital leases and other									3				11
Total debt									21,314				22,331
TW NY Cable Preferred Membership Units		2013			8.210%				300				300
Total debt and mandatorily redeemable preferred equity								$	21,614			$	22,631

       On November 3, 2010, the Company entered into the $4.0 billion Revolving Credit Facility and the $5.875 billion Revolving Credit Facility was terminated. See the “Recent Developments—$4.0 Billion Revolving Credit Facility” and the 2009 Form 10-K for further details regarding the Company’s outstanding debt and mandatorily redeemable preferred equity and other financing arrangements, including certain information about maturities, covenants, rating triggers and bank credit agreement leverage ratios relating to such debt and financing arrangements.

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.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       The following table summarizes the Company’s aggregate contractual obligations as of September 30, 2010, 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):

		2010(a)				2011-2012				2013-2014				Thereafter				Total
Programming purchases(b)		$	909			$	7,570			$	7,050			$	9,856			$	25,385
Outstanding debt obligations and TW NY Cable Preferred Membership Units(c)			—				2,101				3,551				15,751				21,403
Interest and dividends(d)			313				2,962				2,508				12,111				17,894
Facility leases(e)			30				215				177				396				818
Digital Phone connectivity(f)			124				582				71				—				777
Data processing services			18				124				36				—				178
High-speed data connectivity(g)			14				41				7				22				84
Other			22				185				112				71				390
Total		$	1,430			$	13,780			$	13,512			$	38,207			$	66,929

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 revenues, Operating Income (Loss) before Depreciation and Amortization, 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 susceptible to uncertainty and changes in circumstances.

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)

       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 the 2009 Form 10-K, and in TWC’s other filings made from time to time with the SEC 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 and voice providers, particularly direct broadcast satellite operators, incumbent local telephone companies, companies that deliver programming over broadband Internet connections, and wireless broadband and phone providers;
	•		the Company’s ability to deal effectively with the current economic slowdown 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 revenues;
	•		the Company’s continued ability to exploit new and existing technologies that appeal to residential and commercial customers;
	•		changes in the regulatory and tax environments in which the Company operates, including, among others, regulation of broadband Internet services under Title II of the Communications Act of 1934, as amended, “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 in the Company’s plans, initiatives and strategies.

       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.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

       The Company, 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 the Company’s “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (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 the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in reports filed or submitted by the Company 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 the Company is accumulated and communicated to the Company’s management to allow timely decisions regarding the required disclosure.

Changes in Internal Control Over Financial Reporting

       There have not been any changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

TIME WARNER CABLE INC.

(Unaudited)

		September 30,				December 31,
		2010				2009
		(in millions)
ASSETS
Current assets:
Cash and equivalents		$	1,128			$	1,048
Receivables, less allowances of $91 million and $74 million as of September 30, 2010 and December 31, 2009, respectively			673				663
Deferred income tax assets			133				139
Other current assets			409				252
Total current assets			2,343				2,102
Investments			905				975
Property, plant and equipment, net			13,666				13,919
Intangible assets subject to amortization, net			139				274
Intangible assets not subject to amortization			24,092				24,092
Goodwill			2,090				2,111
Other assets			451				221
Total assets		$	43,686			$	43,694
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	342			$	478
Deferred revenue and subscriber-related liabilities			163				170
Accrued programming expense			787				738
Other current liabilities			1,504				1,572
Total current liabilities			2,796				2,958
Long-term debt			21,314				22,331
Mandatorily redeemable preferred equity issued by a subsidiary			300				300
Deferred income tax liabilities, net			9,382				8,957
Other liabilities			461				459
Commitments and contingencies (Note 11)
TWC shareholders’ equity:
Common stock, $0.01 par value, 355.6 million and 352.5 million shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively			4				4
Paid-in capital			9,607				9,813
Accumulated other comprehensive loss, net			(289	)			(319	)
Retained earnings (accumulated deficit)			103				(813	)
Total TWC shareholders’ equity			9,425				8,685
Noncontrolling interests			8				4
Total equity			9,433				8,689
Total liabilities and equity		$	43,686			$	43,694

See accompanying notes.

TIME WARNER CABLE INC.

(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
		(in millions, except per share data)
Revenues:
Subscription:
Video		$	2,743			$	2,698			$	8,264			$	8,071
High-speed data			1,255				1,138				3,680				3,362
Voice			513				480				1,511				1,402
Total Subscription			4,511				4,316				13,455				12,835
Advertising			223				182				612				501
Total revenues			4,734				4,498				14,067				13,336
Costs and expenses:
Costs of revenues(a)			2,239				2,163				6,657				6,423
Selling, general and administrative(a)			781				716				2,278				2,137
Depreciation			745				713				2,237				2,105
Amortization			29				64				156				183
Restructuring costs			13				14				44				64
Gain on sale of cable systems			—				—				—				(2	)
Total costs and expenses			3,807				3,670				11,372				10,910
Operating Income			927				828				2,695				2,426
Interest expense, net			(346	)			(348	)			(1,034	)			(974	)
Other expense, net			(25	)			(19	)			(58	)			(83	)
Income before income taxes			556				461				1,603				1,369
Income tax provision			(193	)			(193	)			(683	)			(600	)
Net income			363				268				920				769
Less: Net income attributable to noncontrolling interests			(3	)			—				(4	)			(21	)
Net income attributable to TWC shareholders		$	360			$	268			$	916			$	748
Net income per common share attributable to TWC common shareholders:
Basic		$	1.00			$	0.76			$	2.56			$	2.15
Diluted		$	1.00			$	0.76			$	2.55			$	2.14
Average common shares outstanding:
Basic			355.5				352.4				354.4				347.9
Diluted			361.0				354.5				359.4				348.9
Cash dividends declared per share		$	0.40			$	—			$	1.20			$	—
Special cash dividend declared and paid per share		$	—			$	—			$	—			$	30.81

See accompanying notes.

TIME WARNER CABLE INC.

(Unaudited)

		Nine Months Ended
		September 30,
		2010				2009
		(in millions)
OPERATING ACTIVITIES
Net income		$	920			$	769
Adjustments for noncash and nonoperating items:
Depreciation			2,237				2,105
Amortization			156				183
Pretax gain on asset sales			—				(2	)
Loss from equity investments, net of cash distributions			83				42
Deferred income taxes			461				458
Equity-based compensation			82				77
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Receivables			(14	)			47
Accounts payable and other liabilities			(226	)			136
Other changes			75				(10	)
Cash provided by operating activities			3,774				3,805
INVESTING ACTIVITIES
Acquisitions and investments, net of cash acquired and distributions received			55				6
Capital expenditures			(2,148	)			(2,287	)
Other investing activities			7				9
Cash used by investing activities			(2,086	)			(2,272	)
FINANCING ACTIVITIES
Borrowings (repayments), net(a)			(1,261	)			2,215
Borrowings(b)			—				10,071
Repayments(b)			(8	)			(7,877	)
Debt issuance costs			—				(26	)
Proceeds from exercise of stock options			86				2
Dividends paid			(432	)			—
Payment of special cash dividend			—				(10,856	)
Other financing activities			7				(5	)
Cash used by financing activities			(1,608	)			(6,476	)
Increase (decrease) in cash and equivalents			80				(4,943	)
Cash and equivalents at beginning of period			1,048				5,449
Cash and equivalents at end of period		$	1,128			$	506

See accompanying notes.

TIME WARNER CABLE INC.

(Unaudited)

		TWC				Non-
		Shareholders’				controlling				Total
		Equity				Interests				Equity
		(in millions)
Balance as of December 31, 2008		$	17,164			$	1,110			$	18,274
Net income			748				21				769
Other comprehensive income			19				—				19
Comprehensive income			767				21				788
Equity-based compensation			75				2				77
Redemption of Historic TW’s interest in TW NY			1,128				(1,128	)			—
Special cash dividend ($30.81 per common share)			(10,856	)			—				(10,856	)
Retained distribution related to unvested restricted stock units			(46	)			—				(46	)
Other changes			(17	)			(1	)			(18	)
Balance as of September 30, 2009		$	8,215			$	4			$	8,219
Balance as of December 31, 2009		$	8,685			$	4			$	8,689
Net income			916				4				920
Other comprehensive income			30				—				30
Comprehensive income			946				4				950
Equity-based compensation			82				—				82
Shares issued upon the exercise of TWC stock options			95				—				95
Cash dividends ($1.20 per common share)			(432	)			—				(432	)
Other changes(a)			49				—				49
Balance as of September 30, 2010		$	9,425			$	8			$	9,433

See accompanying notes.

TIME WARNER CABLE INC.

(Unaudited)

1.    DESCRIPTION OF BUSINESS, RECENT DEVELOPMENTS AND BASIS OF PRESENTATION

Description of Business

       Time Warner Cable Inc. (together with its subsidiaries, “TWC” or the “Company”) is the second-largest cable operator in the U.S., with technologically advanced, well-clustered systems located mainly in five geographic areas – New York State (including New York City), the Carolinas, Ohio, Southern California (including Los Angeles) and Texas. TWC offers video, high-speed data and voice services over its broadband cable systems to residential and commercial customers. TWC markets its services separately and in “bundled” packages of multiple services and features. TWC also sells advertising to a variety of national, regional and local advertising customers.

Recent Developments

Common Stock Repurchase Program

       On October 29, 2010, TWC’s Board of Directors authorized a common stock repurchase program that allows TWC to repurchase up to an aggregate of $4.0 billion of its common stock. Purchases under this stock repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.

Common Stock Dividend

       Beginning in March 2010, the Company paid a quarterly cash dividend of $0.40 per share of TWC common stock to TWC stockholders on the respective record date. The total amount of dividends paid during the nine months ended September 30, 2010 was $432 million. On November 3, 2010, the Company’s Board of Directors declared a quarterly cash dividend of $0.40 per share of TWC common stock, payable in cash on December 15, 2010 to stockholders of record at the close of business on November 30, 2010.

Basis of Presentation

Separation from Time Warner

       As discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”), in March 2009, TWC completed its separation from Time Warner (the “Separation”), which, prior to the Separation, owned approximately 84% of the common stock of TWC (representing a 90.6% voting interest) and a 12.43% non-voting common stock interest in TW NY Cable Holding Inc. (“TW NY”), a subsidiary of TWC. As a result of the Separation, Time Warner no longer has an ownership interest in TWC or TW NY.

Basis of Consolidation

       The consolidated financial statements include all of the assets, liabilities, revenues, 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.

TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

       Significant estimates inherent in the preparation of the consolidated financial statements include accounting for asset impairments, allowances for doubtful accounts, investments, depreciation and amortization, business combinations, pension benefits, equity-based compensation, income taxes, contingencies and certain programming arrangements. Allocation methodologies used to prepare the consolidated financial statements are based on estimates and have been described in the notes, where appropriate.

Reclassifications

       Certain reclassifications have been made to the prior year financial information to conform to the current year presentation.

Interim Financial Statements

       The consolidated financial statements are unaudited; however, in the opinion of management, they contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with GAAP applicable to interim periods. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements of TWC included in the 2009 Form 10-K.

Net Income per Common Share

       Basic net income 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 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 (in millions, except per share data):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Net income attributable to TWC shareholders		$	360			$	268			$	916			$	748
Net income allocated to participating securities(a)			(3	)			—				(7	)			—
Net income attributable to TWC common shareholders		$	357			$	268			$	909			$	748
Average common shares outstanding:
Basic			355.5				352.4				354.4				347.9
Dilutive effect of non-participating equity awards			2.3				0.6				2.2				0.1
Diluted (two-class method)			357.8				353.0				356.6				348.0
Dilutive effect of participating equity awards(a)			3.2				1.5				2.8				0.9
Diluted (treasury stock method)			361.0				354.5				359.4				348.9
Net income per common share attributable to TWC common shareholders:
Basic		$	1.00			$	0.76			$	2.56			$	2.15
Diluted		$	1.00			$	0.76			$	2.55			$	2.14