Time Warner Cable Reports 2012 Third-Quarter Results

Residential services revenues

Residential services revenue growth was primarily driven by an increase in high-speed data revenues, partially offset by declines in video and voice revenues.

• The growth in residential high-speed data revenues was the result of growth in high-speed data subscribers and an increase in average revenues per subscriber (due to both price increases and a greater percentage of subscribers purchasing higher-priced tiers of service).
• Residential video revenues decreased driven by declines in video subscribers and transactional video-on-demand revenues, partially offset by price increases, a greater percentage of subscribers purchasing higher-priced tiers of service and increased revenues from equipment rental charges.
• Residential voice revenues decreased slightly due to a decrease in average revenues per subscriber, primarily due to promotional offers, partially offset by growth in voice subscribers.

Business services revenues

Business services revenue growth was primarily due to increases in high-speed data and voice subscribers and growth in Metro Ethernet revenues.

Advertising revenues

Advertising revenues increased primarily as a result of increases in political advertising and revenues from advertising inventory sold on behalf of other video distributors.

Adjusted Operating Income before Depreciation and Amortization (“Adjusted OIBDA”) for the third quarter of 2012 increased 9.2% from the third quarter of 2011 to $1.9 billion. The increase was driven by revenue growth, partially offset by a 9.2% increase in operating expenses.

Operating expenses grew primarily due to higher employee costs, video programming expenses, other operating costs and voice costs. Employee costs were up 10.0% to $1.1 billion, due to higher headcount (primarily driven by acquisitions and organic growth in business services, partially offset by an organic decline in residential services) and higher compensation costs per employee. Pension costs increased $15 million. Video programming expenses grew 8.2% to $1.2 billion due to an increase in average monthly video programming costs per video subscriber and a net increase in video subscribers (primarily due to the acquisition of Insight offset, in part, by an organic decline in video subscribers). Average monthly video programming costs per video subscriber increased 6.1% year-over-year to $31.45 for the third quarter of 2012, primarily driven by contractual rate increases, partially offset by a decline in transactional video-on-demand costs. For the third quarter of 2012 and 2011, video programming costs were reduced by approximately $5 million and $10 million, respectively, due to net changes in cost estimates for programming services carried without a contract, changes in programming audit reserves and certain contract settlements. Voice costs were up 11.0% to $151 million, primarily as a result of an increase in voice subscribers due to both organic growth and the Insight acquisition, partially offset by a decrease in delivery costs per subscriber related to the in-sourcing of voice transport, switching and interconnection services.

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