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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
[October 30, 2014]

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS


(Edgar Glimpses Via Acquire Media NewsEdge) 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 and nine months ended September 30, 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 financial condition as of September 30, 2014 and cash flows for the nine months ended September 30, 2014.


• 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 the Company's Annual Report on Form 10-K for the year ended December 31, 2013 (the "2013 Form 10-K") 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 September 30, 2014, TWC served approximately 15.1 million customers who subscribed to one or more of its video, high-speed data and voice services.

During the nine months ended September 30, 2014, TWC's revenue increased 2.9% to approximately $17.0 billion.

Comcast Merger On February 12, 2014, the Company entered into an Agreement and Plan of Merger (the "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 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Reportable Segments Effective in the first quarter of 2014, the Company determined it has three reportable segments: Residential Services, Business Services and Other Operations. The Company's reportable segments have been determined based on how management evaluates and manages the business. The Company has recast its financial information and disclosures for the prior periods to reflect the segment disclosures as if the current presentation had been in effect throughout all periods presented. 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 September 30, 2014, the Company served 14.5 million residential services customers and, during the nine months ended September 30, 2014, TWC generated approximately $13.8 billion of revenue from the provision of residential services, which represented 81.3% of TWC's total revenue.

TWC's video service provides over 300 channels (including, on average, 200 high-definition ("HD") channels) and 28,000 hours of video-on-demand programming, 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 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 250,000 Cable WiFi hotspots along with communications and Internet security features. TWC's voice service provides unlimited calling to the U.S., Canada, Puerto Rico and Mexico 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 increases in the number of high-speed data subscribers and growth in revenue per residential customer relationship (the latter 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 losses in residential video subscribers.

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, partially offset by a decline in total video subscribers. 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 September 30, 2014, TWC served 674,000 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 the nine months ended September 30, 2014, revenue from the provision of business services increased 22.8% to $2.1 billion, which represented 12.2% 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) 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 $87 million for the nine months ended September 30, 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) 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 the nine months ended September 30, 2014, TWC generated revenue from Other Operations of $1.3 billion.

As discussed further below in "-Financial Statement Presentation," TWC Media sells video and online advertising inventory to local, regional and national advertising customers and 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. 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.

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.

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 and voice services face competition from wireless Internet and voice providers. TWC's residential voice service also faces competition from "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 telecommunication 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) 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 As a result of the Company's entry into the merger agreement with Comcast, the Company's common stock repurchase program (the "Stock Repurchase Program") was suspended 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 September 30, 2014, the Company had $2.723 billion remaining under the Stock Repurchase Program authorization.

Financial Statement Presentation Basis of Presentation Changes in Basis of Presentation Effective in the first quarter of 2014, the Company determined it has three reportable segments. The Company has recast its financial information and disclosures for the prior periods to reflect the segment disclosures as if the current presentation had been in effect throughout all periods presented. Refer to Note 11 to the accompanying consolidated financial statements for further information regarding the Company's segment information.

Additionally, during the first quarter of 2014, the Company revised its categorization of operating costs and expenses to be consistent with how such costs and expenses are presented to management and to provide a more meaningful presentation. The Company has recast the accompanying consolidated financial statements, financial information and disclosures of operating costs and expenses for the prior periods to reflect the new categorization, which had no impact on total operating costs and expenses, Operating Income or net income attributable to TWC shareholders for any period presented. The Company's consolidated operating costs and expenses are presented in the following categories: (i) programming and content, (ii) sales and marketing, (iii) technical operations, (iv) customer care and (v) other operating costs.

Reclassifications As discussed above, certain reclassifications have been made to the prior period financial information presented herein to conform to the current year 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." 4-------------------------------------------------------------------------------- Table of Contents TIME WARNER CABLE INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Operating costs and expenses Programming and content. Programming and content costs include (i) video 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 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 and fees collected on behalf of local franchising authorities and the Federal Communications Commission (the "FCC").

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) 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.

• 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) 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 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) fees received from distributors of the Lakers' RSNs; (ii) fees paid to TWC 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.

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 11 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 Three and Nine Months Ended September 30, 2014 Compared to Three and Nine Months Ended September 30, 2013 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 2013 Form 10-K, as recast in the Current Report on Form 8-K filed with the Securities and Exchange Commission (the "SEC") on April 24, 2014.

Consolidated Results The consolidated financial results for the Company for the three and nine months ended September 30, 2014 and 2013 were as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Revenue: Residential services $ 4,615 $ 4,579 0.8% $ 13,845 $ 13,822 0.2% Business services 724 594 21.9% 2,083 1,696 22.8% Other 375 345 8.7% 1,094 1,025 6.7% Total revenue 5,714 5,518 3.6% 17,022 16,543 2.9% Costs and expenses: Programming and content 1,326 1,210 9.6% 3,976 3,719 6.9% Sales and marketing(a) 556 528 5.3% 1,655 1,497 10.6% Technical operations(a) 401 394 1.8% 1,143 1,129 1.2% Customer care(a) 210 191 9.9% 622 575 8.2% Other operating(a) 1,167 1,190 (1.9%) 3,538 3,669 (3.6%) Depreciation 824 790 4.3% 2,394 2,371 1.0% Amortization 33 32 3.1% 101 95 6.3% Merger-related and restructuring costs 46 23 100.0% 187 81 130.9% Total costs and expenses 4,563 4,358 4.7% 13,616 13,136 3.7% Operating Income 1,151 1,160 (0.8%) 3,406 3,407 - Interest expense, net (353) (379) (6.9%) (1,066) (1,175) (9.3%) Other income, net 5 - NM 28 10 180.0% Income before income taxes 803 781 2.8% 2,368 2,242 5.6% Income tax provision (304) (249) 22.1% (891) (828) 7.6% Net income 499 532 (6.2%) 1,477 1,414 4.5% Less: Net income attributable to noncontrolling interests - - NM - - NM Net income attributable to TWC shareholders $ 499 $ 532 (6.2%) $ 1,477 $ 1,414 4.5% NM-Not meaningful.

(a) Amounts include total employee costs, as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast)Employee costs $ 1,238 $ 1,225 1.1% $ 3,720 $ 3,646 2.0% Revenue. The increase in revenue for the three and nine months ended September 30, 2014 was due to growth in revenue at all segments. Revenue by segment is discussed in greater detail below in "Segment Results." 8-------------------------------------------------------------------------------- Table of Contents TIME WARNER CABLE INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Costs and expenses Operating costs and expenses. The increase in operating costs and expenses for the three and nine months ended September 30, 2014 was primarily due to increases in the following, which are discussed further in "Segment Results": 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 decreases in voice costs at the Residential Services and Business Services segments. The growth in operating costs and expenses for the three and nine months ended September 30, 2014 was reduced by a decrease in pension expense of $31 million and $92 million, respectively.

Depreciation. The increase in depreciation for the three and nine months ended September 30, 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 Communications Company, Inc. ("Insight") assets (acquired on February 29, 2012) that were fully depreciated as of August 2013.

Merger-related and restructuring costs. For the three and nine months ended September 30, 2014, the Company incurred merger-related costs of $48 million and $163 million, respectively. These costs primarily consisted of Comcast merger-related costs, which, for the three and nine months ended September 30, 2014, included employee retention costs of $34 million and $103 million, respectively, and advisory and legal fees of $15 million and $57 million, respectively. Merger-related costs for the three and nine months ended September 30, 2014 also included a $1 million reversal and $3 million of costs, respectively, incurred in connection with the DukeNet acquisition. During the three and nine months ended September 30, 2013, the Company incurred merger-related costs of $2 million and $9 million, respectively, in connection with the Insight acquisition. The Company expects to incur additional merger-related costs during the remainder of 2014 in connection with the Comcast merger.

The results for the three and nine months ended September 30, 2014 included a net $2 million reversal and $24 million of restructuring costs, respectively, and for the three and nine months ended September 30, 2013, restructuring costs of $21 million and $72 million, respectively, primarily related to employee terminations and other exit costs. The Company expects to incur additional restructuring costs during the remainder of 2014.

Operating Income. Operating Income for the three and nine months ended September 30, 2014 decreased slightly primarily due to higher operating costs and expenses, depreciation and merger-related and restructuring costs, partially offset by growth in revenue, as discussed above.

Interest expense, net. Interest expense, net, for the three and nine months ended September 30, 2014 decreased primarily due to lower average fixed-rate debt outstanding during the periods as compared to 2013.

Other income, net. Other income, net, detail is shown in the table below (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 2014 2013 Income from equity-method investments, net $ 5 $ 2 $ 27 $ 16 Gain (loss) on equity award reimbursement obligation to Time Warner(a) - (3) 1 (8) Other - 1 - 2 Other income, net $ 5 $ - $ 28 $ 10 (a) See Note 6 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").

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Income tax provision. For the three months ended September 30, 2014 and 2013, the Company recorded income tax provisions of $304 million and $249 million, respectively. For the nine months ended September 30, 2014 and 2013, the Company recorded income tax provisions of $891 million and $828 million, respectively.

The effective tax rates were 37.9% and 31.9% for the three months ended September 30, 2014 and 2013, respectively, and 37.6% and 36.9% for the nine months ended September 30, 2014 and 2013, respectively.

The income tax provision and effective tax rate for the nine months ended September 30, 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 provisions and the effective tax rates for the three and nine months ended September 30, 2013 include (i) a benefit of $32 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.

Absent the impact of these items, the effective tax rates would have been 37.9% and 39.4% for the three months ended September 30, 2014 and 2013, respectively, and 38.6% and 39.6% for the nine months ended September 30, 2014 and 2013, 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 (in millions, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change Net income attributable to TWC shareholders $ 499 $ 532 (6.2%) $ 1,477 $ 1,414 4.5% Net income per common share attributable to TWC common shareholders: Basic $ 1.77 $ 1.86 (4.8%) $ 5.25 $ 4.85 8.2% Diluted $ 1.76 $ 1.84 (4.3%) $ 5.22 $ 4.81 8.5% Net income attributable to TWC shareholders for the three months ended September 30, 2014 decreased primarily due an increase in income tax provision and a decrease in Operating Income, partially offset by a decrease in interest expense, net. Net income attributable to TWC shareholders for the nine months ended September 30, 2014 increased primarily due to a decrease in interest expense, net, partially offset by an increase in income tax provision. Net income per common share attributable to TWC common shareholders for the three and nine months ended September 30, 2014 benefited from lower average common shares outstanding as a result of share repurchases under the Stock Repurchase Program.

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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 the three and nine months ended September 30, 2014 and 2013 were as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Revenue: Video $ 2,497 $ 2,600 (4.0%) $ 7,538 $ 7,945 (5.1%) High-speed data 1,620 1,461 10.9% 4,784 4,291 11.5% Voice 476 498 (4.4%) 1,462 1,534 (4.7%) Other 22 20 10.0% 61 52 17.3% Total revenue 4,615 4,579 0.8% 13,845 13,822 0.2% Operating costs and expenses: Programming 1,274 1,217 4.7% 3,811 3,670 3.8% Sales and marketing(a) 375 363 3.3% 1,113 1,019 9.2% Technical operations(a) 362 360 0.6% 1,030 1,033 (0.3%) Customer care(a) 176 163 8.0% 522 491 6.3% Video franchise and other fees(b) 117 119 (1.7%) 350 367 (4.6%) Other(a) 185 234 (20.9%) 569 748 (23.9%) Total operating costs and expenses 2,489 2,456 1.3% 7,395 7,328 0.9% OIBDA $ 2,126 $ 2,123 0.1% $ 6,450 $ 6,494 (0.7%) (a) Amounts include total employee costs, as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Employee costs $ 693 $ 678 2.2% $ 2,032 $ 1,969 3.2% (b) Video franchise and other fees include fees collected on behalf of franchising authorities and the FCC.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Selected residential subscriber-related statistics as of September 30, 2014 and 2013 were as follows (in thousands): September 30, 2014(a) 2013 % Change Video(b) 10,827 11,414 (5.1%) High-speed data(c) 11,507 11,050 4.1% Voice(d) 4,989 4,805 3.8% Single play(e) 5,674 5,656 0.3% Double play(f) 4,700 4,824 (2.6%) Triple play(g) 4,083 3,989 2.4% Customer relationships(h) 14,457 14,469 (0.1%) (a) The Company's subscriber numbers as of September 30, 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. 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 for the three and nine months ended September 30, 2014 increased 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.

Average monthly revenue per unit for the Residential Services segment for the three and nine months ended September 30, 2014 and 2013 was as follows: Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change Video(a) $ 76.39 $ 74.90 2.0% $ 75.77 $ 74.90 1.2% High-speed data(b) 47.24 44.07 7.2% 46.83 43.15 8.5% Voice(c) 31.86 34.06 (6.5%) 32.97 34.44 (4.3%) Customer relationship(d) 106.58 105.06 1.4% 106.34 105.04 1.2% (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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) The major components of residential video revenue for the three and nine months ended September 30, 2014 and 2013 were as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change Programming tiers(a) $ 1,621 $ 1,692 (4.2%) $ 4,898 $ 5,173 (5.3%) Premium networks 204 183 11.5% 606 577 5.0% Transactional video-on-demand 52 70 (25.7%) 172 202 (14.9%) Video equipment rental and installation charges 349 359 (2.8%) 1,033 1,099 (6.0%) DVR service 154 177 (13.0%) 479 527 (9.1%) Franchise and other fees(b) 117 119 (1.7%) 350 367 (4.6%) Total $ 2,497 $ 2,600 (4.0%) $ 7,538 $ 7,945 (5.1%) (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 for the three and nine months ended September 30, 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 the three and nine months ended September 30, 2013, was reduced by approximately $15 million of subscriber credits issued 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.

Residential high-speed data revenue increased for the three and nine months ended September 30, 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.

The decrease in residential voice revenue for the three and nine months ended September 30, 2014 was primarily due to a decrease in average revenue per subscriber, which, for the three months ended September 30, 2014, was partially offset by growth in voice subscribers.

Operating costs and expenses. Operating costs and expenses for the three and nine months ended September 30, 2014 increased primarily due to increases in programming costs, sales and marketing costs and customer care costs, partially offset by a decline in other operating costs. Selected Residential Services average monthly costs per subscriber for the three and nine months ended September 30, 2014 and 2013 were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % ChangeProgramming costs per video subscriber $ 38.96 $ 35.08 11.1% $ 38.31 $ 34.60 10.7% Voice costs per voice subscriber $ 3.95 $ 7.81 (49.4%) $ 4.43 $ 8.42 (47.4%) For the three and nine months ended September 30, 2014, 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) 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 the three and nine months ended September 30, 2013, programming costs were reduced by $10 million and $20 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. The Company expects the rate of growth in Residential Services average monthly programming costs per video subscriber in the fourth quarter of 2014 to increase compared to the fourth quarter of 2013.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Sales and marketing costs for the three and nine months ended September 30, 2014 increased primarily due to headcount growth and higher compensation costs per employee, including customer retention, and, for the nine months ended September 30, 2014, increased marketing activities.

Customer care costs for the three and nine months ended September 30, 2014 increased primarily due to growth in employee costs.

Other operating costs for the three and nine months ended September 30, 2014 decreased primarily due to a decline in voice costs. Voice costs for the three and nine months ended September 30, 2014 decreased $55 million and $179 million, respectively, 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). The Company expects Residential Services average monthly voice costs per voice subscriber to decrease in the fourth quarter of 2014 compared to the fourth quarter of 2013.

OIBDA. OIBDA for the three months ended September 30, 2014 increased slightly due to revenue growth, partially offset by an increase in operating costs and expenses. OIBDA for the nine months ended September 30, 2014 decreased due to an increase in operating costs and expenses, partially offset by growth in revenue.

Business Services. The financial results of the Business Services segment for the three and nine months ended September 30, 2014 and 2013 were as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Revenue: Video $ 93 $ 87 6.9% $ 272 $ 258 5.4% High-speed data 343 282 21.6% 980 806 21.6% Voice 132 110 20.0% 373 308 21.1% Wholesale transport 105 65 61.5% 303 181 67.4% Other 51 50 2.0% 155 143 8.4% Total revenue 724 594 21.9% 2,083 1,696 22.8% Operating costs and expenses: Programming 36 34 5.9% 109 99 10.1% Sales and marketing(a) 132 119 10.9% 387 333 16.2% Technical operations(a) 27 22 22.7% 75 59 27.1% Customer care(a) 34 28 21.4% 100 84 19.0% Video franchise and other fees(b) 5 5 - 13 13 - Other(a) 48 42 14.3% 146 126 15.9% Total operating costs and expenses 282 250 12.8% 830 714 16.2% OIBDA $ 442 $ 344 28.5% $ 1,253 $ 982 27.6% (a) Amounts include total employee costs, as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Employee costs $ 164 $ 145 13.1% $ 476 $ 408 16.7% (b) Video franchise and other fees include fees collected on behalf of franchising authorities and the FCC.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Selected business subscriber-related statistics as of September 30, 2014 and 2013 were as follows (in thousands): September 30, 2014 2013 % Change Video(a) 203 193 5.2% High-speed data(b) 566 500 13.2% Voice(c) 313 262 19.5% Single play(d) 341 322 5.9% Double play(e) 258 220 17.3% Triple play(f) 75 64 17.2% Customer relationships(g) 674 606 11.2% (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) 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.

(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) 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. Customers who purchase wholesale transport or cloud services but do not purchase one of the Company's video, high-speed data or voice services are not included in the Company's subscriber results.

Revenue. Business services revenue for the three and nine months ended September 30, 2014 increased primarily due to growth in high-speed data and voice subscribers, an organic increase in cell tower backhaul revenue of $9 million and $30 million, respectively, and DukeNet revenue of $29 million and $87 million, respectively (the majority of which is included in wholesale transport).

Operating costs and expenses. Operating costs and expenses for the three and nine months ended September 30, 2014 increased 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.

OIBDA. OIBDA for the three and nine months ended September 30, 2014 increased due to the increase in revenue, partially offset by higher operating costs and expenses, as discussed above.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Other Operations. The financial results of the Other Operations segment for the three and nine months ended September 30, 2014 and 2013 were as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Revenue: Advertising $ 276 $ 253 9.1% $ 795 $ 741 7.3% Other 162 140 15.7% 479 432 10.9% Total revenue 438 393 11.5% 1,274 1,173 8.6% Operating costs and expenses(a) 240 152 57.9% 730 533 37.0% OIBDA $ 198 $ 241 (17.8%) $ 544 $ 640 (15.0%) (a) Amounts include total employee costs, as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Employee costs $ 77 $ 76 1.3% $ 240 $ 238 0.8% Revenue. Advertising revenue for the three and nine months ended September 30, 2014 increased primarily due to growth in political advertising revenue, as well as higher non-political revenue from ad rep agreements. Political advertising revenue was $26 million and $52 million for the three and nine months ended September 30, 2014, respectively, compared to $12 million and $21 million for the three and nine months ended September 30, 2013, respectively. The Company expects advertising revenue in the fourth quarter of 2014 to increase compared to the fourth quarter of 2013 due to an increase in political advertising revenue.

Other revenue for the three and nine months ended September 30, 2014 increased primarily due to affiliate fees from the Residential Services segment as well as other distributors of the Lakers' RSNs.

Operating costs and expenses. Operating costs and expenses for the three and nine months ended September 30, 2014 increased primarily related to SportsNet LA content costs and growth in costs associated with ad rep agreements.

OIBDA. OIBDA for the three and nine months ended September 30, 2014 decreased 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 the three and nine months ended September 30, 2014 and 2013 were as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Operating costs and expenses(a) $ 712 $ 703 1.3% $ 2,159 $ 2,162 (0.1%) Merger-related and restructuring costs 46 23 100.0% 187 81 130.9% Total costs and expenses $ 758 $ 726 4.4% $ 2,346 $ 2,243 4.6% (a) Amounts include total employee costs, as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 % Change 2014 2013 % Change (recast) (recast) Employee costs $ 304 $ 326 (6.7%) $ 972 $ 1,031 (5.7%) Operating costs and expenses. Operating costs and expenses for the three and nine months ended September 30, 2014 were impacted by increased maintenance expense, as well as lower costs as a result of operating efficiencies, including decreased headcount.

Merger-related and restructuring costs. Merger-related costs of $48 million and $163 million were incurred for the three and nine months ended September 30, 2014, respectively. These costs primarily consisted of Comcast merger-related costs, which, for the three and nine months ended September 30, 2014, included employee retention costs of $34 million and $103 million, respectively, and advisory and legal fees of $15 million and $57 million, respectively.

Merger-related costs for the three and nine months ended September 30, 2014 also included a $1 million reversal and $3 million of costs, respectively, incurred in connection with the DukeNet acquisition. During the three and nine months ended September 30, 2013, the Company incurred merger-related costs of $2 million and $9 million, respectively, in connection with the Insight acquisition. The Company expects to incur additional merger-related costs during the remainder of 2014 in connection with the Comcast merger.

The results for the three and nine months ended September 30, 2014 included a net $2 million reversal and $24 million of restructuring costs, respectively, and for the three and nine months ended September 30, 2013, restructuring costs of $21 million and $72 million, respectively, primarily related to employee terminations and other exit costs. The Company expects to incur additional restructuring costs during the remainder of 2014.

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.

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 $2.939 billion as of September 30, 2014, reflecting $526 million of cash and equivalents and $2.413 billion of available borrowing capacity under the Revolving Credit Facility.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Current Financial Condition As of September 30, 2014, the Company had $24.302 billion of debt, $526 million of cash and equivalents (net debt of $23.776 billion, defined as total debt less cash and equivalents) and $7.905 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 September 30, 2014 (in millions): Balance as of December 31, 2013 $ 24,527 Cash provided by operating activities (4,540) Capital expenditures 3,179 Dividends paid 642 Repurchases of common stock 259 Proceeds from exercise of stock options (199) Excess tax benefit from equity-based compensation (131) All other, net 39 Balance as of September 30, 2014 $ 23,776 On October 23, 2014, the Company's Board of Directors declared a quarterly cash dividend of $0.75 per share of TWC common stock, payable in cash on December 15, 2014 to stockholders of record at the close of business on November 28, 2014.

Cash Flows Cash and equivalents increased $1 million for the nine months ended September 30, 2014 and decreased $2.428 billion for the nine months ended September 30, 2013. Components of these changes are discussed below in more detail.

Operating Activities Details of cash provided by operating activities are as follows (in millions): Nine Months Ended September 30, 2014 2013 Operating Income $ 3,406 $ 3,407 Depreciation 2,394 2,371 Amortization 101 95 Noncash equity-based compensation 138 100 Cash paid for interest, net(a) (1,187) (1,304) Cash paid for income taxes, net(b) (286) (471) All other, net, including working capital changes (26) (44) Cash provided by operating activities $ 4,540 $ 4,154 (a) Amounts include interest income received (including amounts received under interest rate swap contracts) of $92 million and $121 million for the nine months ended September 30, 2014 and 2013, respectively.

(b) Amounts include cash refunds of income taxes of $14 million and $1 million for the nine months ended September 30, 2014 and 2013, respectively.

Cash provided by operating activities increased from $4.154 billion for the nine months ended September 30, 2013 to $4.540 billion for the nine months ended September 30, 2014. This increase was primarily related to decreases in cash paid for income taxes, net, and cash paid for interest, net.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Cash paid for income taxes, net, for the nine months ended September 30, 2014 decreased 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 was partially offset by the continued reversal of bonus depreciation benefits recorded in prior years. The Company expects that cash paid for income taxes, net, in 2014 will decrease compared to 2013.

Cash paid for interest, net, for the nine months ended September 30, 2014 decreased primarily as a result of the maturity of TWC's 6.20% senior notes due July 2013 ($1.5 billion in aggregate principal amount) and 8.25% senior notes due February 2014 ($750 million in aggregate principal amount).

The Company made no cash contributions to its qualified defined benefit pension plans (the "qualified pension plans") during the nine months ended September 30, 2014. As of September 30, 2014, the qualified pension plans were estimated to be overfunded by $116 million, and the Company does not expect to make any discretionary cash contributions to the qualified pension plans during the remainder of 2014. For the nonqualified defined benefit pension plan (the "nonqualified pension plan"), the Company will continue to make contributions during the remainder of 2014 to the extent benefits are paid.

Investing Activities Details of cash used by investing activities are as follows (in millions): Nine Months Ended September 30, 2014 2013 Capital expenditures $ (3,179) $ (2,371) Purchases of investments: Short-term investments in U.S. Treasury securities - (575) All other (2) (11) Return of capital from investees - 7 Proceeds from sale, maturity and collection of investments 18 476 Acquisition of intangible assets (31) (30) Other investing activities 22 19 Cash used by investing activities $ (3,172) $ (2,485) Cash used by investing activities increased from $2.485 billion for the nine months ended September 30, 2013 to $3.172 billion for the nine months ended September 30, 2014, principally due to an increase in capital expenditures, partially offset by the 2013 purchases of short-term investments in U.S.

Treasury securities (net of maturities).

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) TWC's capital expenditures by major category were as follows (in millions): Nine Months Ended September 30, 2014 2013 Customer premise equipment(a) $ 1,231 $ 829 Scalable infrastructure(b) 797 592 Line extensions(c) 517 421 Upgrades/rebuilds(d) 107 85 Support capital(e) 527 444 Total capital expenditures $ 3,179 $ 2,371 (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 $247 million and $235 million for the nine months ended September 30, 2014 and 2013, respectively.

The Company expects capital expenditures to be approximately $4.0 billion in 2014 as the Company invests to improve network reliability, upgrade older customer premise equipment and expand its network to additional residences, commercial buildings and cell towers.

Financing Activities Details of cash used by financing activities are as follows (in millions): Nine Months Ended September 30, 2014 2013 Short-term borrowings, net $ 1,027 $ - Repayments of long-term debt (1,750) (1,500) Redemption of mandatorily redeemable preferred equity - (300) Dividends paid (642) (573) Repurchases of common stock (259) (1,856) Proceeds from exercise of stock options 199 124 Excess tax benefit from equity-based compensation 131 81 Taxes paid in cash in lieu of shares issued for equity-based compensation (74) (64) Other financing activities 1 (9) Cash used by financing activities $ (1,367) $ (4,097) 20 -------------------------------------------------------------------------------- Table of Contents TIME WARNER CABLE INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Cash used by financing activities was $1.367 billion for the nine months ended September 30, 2014 compared to $4.097 billion for the nine months ended September 30, 2013. Cash used by financing activities for the nine months ended September 30, 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 for the nine months ended September 30, 2013 primarily consisted of repurchases of TWC common stock, the repayment of TWC's 6.20% senior notes due July 2013 ($1.5 billion in aggregate principal amount), the payment of quarterly cash dividends and the redemption of mandatorily redeemable non-voting Series A Preferred Equity Membership Units issued by Time Warner NY Cable LLC, a former subsidiary of TWC.

Outstanding Debt and Available Financial Capacity Debt as of September 30, 2014 and December 31, 2013 was as follows: Outstanding Balance as of September 30, December 31, Maturity Interest Rate 2014 2013 (in millions) TWC notes and debentures(a) 2015-2042 5.736%(b) $ 21,126 $ 22,938 TWCE debentures(c) 2023-2033 7.896%(b) 2,062 2,065 Revolving credit facility(d) 2017 - - Commercial paper program(d) 2017 0.315%(b) 1,027 - Capital leases 2016-2042 87 49 Total debt(e) $ 24,302 $ 25,052 (a) Outstanding balance amounts of the TWC notes and debentures as of September 30, 2014 and December 31, 2013 each include £1.267 billion of senior unsecured notes valued at $2.054 billion and $2.098 billion, respectively, using the exchange rates at each date.

(b) Rate represents a weighted-average effective interest rate as of September 30, 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 Time Warner Cable Enterprises LLC ("TWCE") debentures as of September 30, 2014 and December 31, 2013 include an unamortized fair value adjustment of $62 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 September 30, 2014, the Company had $2.413 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 September 30, 2014 and December 31, 2013 include current maturities of long-term debt of $1.540 billion and $1.767 billion, respectively.

See the 2013 Form 10-K 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 September 30, 2014, TWC was in compliance with the leverage ratio covenant of the Revolving Credit Facility, with a ratio of consolidated total debt as of September 30, 2014 to consolidated EBITDA for the twelve months ended September 30, 2014 of approximately 3.0 times. In accordance with the Revolving Credit Facility agreement, consolidated total debt as of September 30, 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 the twelve months ended September 30, 2014 was calculated as Operating Income plus depreciation, amortization and equity-based compensation expense.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) 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 the 2013 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, networking and voice providers, particularly direct broadcast satellite operators, telecommunication 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; • 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 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.

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