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Time Warner Cable Reports 2012 Third-Quarter Results

Operating Income for the third quarter of 2012 increased 9.2% from the third quarter of 2011 to $1.1 billion, driven by higher Adjusted OIBDA, partially offset by higher depreciation and amortization expenses primarily as a result of the Company’s recent acquisitions (largely Insight). The increase in depreciation expense was partially offset by certain assets acquired in the 2006 transactions with Adelphia Communications Corporation and Comcast Corporation that were fully depreciated as of July 31, 2012.

                                                         
                           
(in millions; unaudited) 3rd Quarter Year-to-Date 9/30
Change Change
2012 2011 $ % 2012 2011 $ %
Adjusted OIBDA (a) $ 1,946 $ 1,782 $ 164 9.2 % $ 5,830 $ 5,337 $ 493 9.2 %
Adjusted OIBDA margin (b) 36.3 % 36.3 % 36.7 % 36.4 %
Merger-related and restructuring costs   (32 )   (21 )   (11 ) 52.4 %   (98 )   (36 )   (62 ) 172.2 %
OIBDA (a) 1,914 1,761 153 8.7 % 5,732 5,301 431 8.1 %
Depreciation (789 ) (750 ) (39 ) 5.2 % (2,377 ) (2,238 ) (139 ) 6.2 %
Amortization   (31 )   (9 )   (22 ) 244.4 % (79 ) (23 )   (56 ) 243.5 %
Operating Income $ 1,094 $ 1,002 $ 92 9.2 % $ 3,276 $ 3,040 $ 236 7.8 %
                                             

(a)  Refer to Note 2 to the accompanying consolidated financial statements for a definition of OIBDA and Adjusted OIBDA.

(b)  Adjusted OIBDA margin is defined as Adjusted OIBDA as a percentage of total revenues.

 

Adjusted OIBDA less Capital Expenditures for the first nine months of 2012 totaled $3.6 billion, an 8.9% increase over the first nine months of 2011, due to higher Adjusted OIBDA, partially offset by higher capital expenditures. Capital Expenditures were $2.2 billion for the first nine months of 2012, a 9.8% increase over the first nine months of 2011, largely reflecting higher spending in line extensions, support capital, customer premise equipment and scalable infrastructure.

                                                         
                           
(in millions; unaudited) 3rd Quarter Year-to-Date 9/30
Change Change
2012 2011 $ % 2012 2011 $ %
Adjusted OIBDA (a) $ 1,946 $ 1,782 $ 164 9.2 % $ 5,830 $ 5,337 $ 493 9.2 %
Capital expenditures   (773 )   (632 )   (141 ) 22.3 % (2,191 ) (1,995 )   (196 ) 9.8 %
Adjusted OIBDA less capital expenditures (a) $ 1,173 $ 1,150 $ 23 2.0 % $ 3,639 $ 3,342 $ 297 8.9 %
                                                             

(a)  Refer to Note 2 to the accompanying consolidated financial statements for a definition of Adjusted OIBDA and Adjusted OIBDA less capital expenditures.

 

Net Income Attributable to TWC Shareholders was $808 million, or $2.64 per basic common share and $2.60 per diluted common share, for the third quarter of 2012 compared to $356 million, or $1.09 per basic common share and $1.08 per diluted common share, for the third quarter of 2011. The growth in net income attributable to TWC shareholders resulted primarily from a change in other income (expense), net, and growth in Operating Income, partially offset by higher income tax provision (which included a net benefit from certain tax matters) and interest expense, net. The change in other income (expense), net, was primarily due to third-quarter 2012 investment-related gains (SpectrumCo, LLC and Clearwire Corporation) and a decline in losses from Clearwire Communications LLC as the Company’s investment was reduced to $0 during the third quarter of 2011.

Adjusted Net Income Attributable to TWC Shareholders and Adjusted Diluted EPS, which exclude the investment-related gains (SpectrumCo and Clearwire) and certain other items affecting the comparability of TWC’s results for the third quarters of 2012 and 2011 detailed in Note 1 to the accompanying consolidated financial statements, were $438 million and $1.41, respectively, for the third quarter of 2012 compared to $366 million and $1.11, respectively, for the third quarter of 2011. These increases were primarily due to higher Operating Income and a change in other income (expense), net, partially offset by higher income tax provision and interest expense, net. The change in other income (expense), net, was primarily due to a decline in losses from Clearwire Communications as the Company’s investment was reduced to $0 during the third quarter of 2011. Additionally, Adjusted Diluted EPS for the third quarter of 2012 benefited from lower average common shares outstanding as a result of share repurchases under the Company’s stock repurchase program.

                                                         
                         

(in millions, except per share data; unaudited)

3rd Quarter Year-to-Date 9/30

 

Change Change
2012 2011 $ % 2012 2011 $ %

Net income attributable to TWC shareholders

$ 808 $ 356 $ 452 127.0% $ 1,642 $ 1,101 $ 541 49.1%

Adjusted net income attributable to TWC shareholders (a)

$ 438 $ 366 $ 72 19.7% $ 1,318 $ 1,126 $ 192 17.1%
 

Net income per common share attributable to TWC common shareholders:

Basic $ 2.64 $ 1.09 $ 1.55 142.2% $ 5.27 $ 3.28 $ 1.99 60.7%
Diluted $ 2.60 $ 1.08 $ 1.52 140.7% $ 5.22 $ 3.24 $ 1.98 61.1%
Adjusted Diluted EPS (a) $ 1.41 $ 1.11 $ 0.30 27.0% $ 4.19 $ 3.32 $ 0.87 26.2%
                                               

(a)  Refer to Note 2 to the accompanying consolidated financial statements for a definition of Adjusted net income attributable to TWC shareholders and Adjusted Diluted EPS.

 

Free Cash Flow for the first nine months of 2012 decreased 16.6% to $2.0 billion from $2.4 billion in the first nine months of 2011, due mainly to lower cash provided by operating activities and an increase in capital expenditures. Cash Provided by Operating Activities for the first nine months of 2012 was $4.1 billion, a 5.3% decrease from $4.3 billion in the first nine months of 2011. This decrease was driven by a significant income tax refund (received in the first quarter of 2011) and increases in income tax payments, net interest payments and pension plan contributions, partially offset by higher Adjusted OIBDA.

                                                                       
                         
(in millions; unaudited) 3rd Quarter Year-to-Date 9/30
Change Change
2012 2011 $ % 2012 2011 $ %
Adjusted OIBDA (a) $ 1,946 $ 1,782 $ 164 9.2 % $ 5,830 $ 5,337 $ 493 9.2 %
Net interest payments (456 ) (408 ) (48 ) 11.8 % (1,302 ) (1,128 ) (174 ) 15.4 %
Net income tax refunds (payments) (214 ) (54 ) (160 ) 296.3 % (291 ) 167 (458 )

 

(274.3

%)

Pension plan contributions (150 ) (77 ) (73 ) 94.8 % (152 ) (79 ) (73 ) 92.4 %
All other, net, including working capitalchanges 69 21 48

 

228.6

%

30 47 (17 )

 

(36.2

%)

Cash provided by operating activities 1,195 1,264 (69 ) (5.5 %) 4,115 4,344 (229 ) (5.3 %)
Add:
Income taxes paid on investment sales NM NM

Excess tax benefit from exercise of stock options

13 5 8 160.0 % 73 46 27 58.7 %
Less:
Capital expenditures (773 ) (632 ) (141 ) 22.3 % (2,191 ) (1,995 ) (196 ) 9.8 %
Cash paid for other intangible assets (11 ) (22 ) 11 (50.0 %) (27 ) (36 ) 9 (25.0 %)
Other   (1 )   (2 )   1   (50.0 %)   (5 )   (4 )   (1 ) 25.0 %
Free Cash Flow (a) 423 613 (190 ) (31.0 %) 1,965 2,355 (390 ) (16.6 %)
Economic Stimulus Act impacts (b)   25     (84 )   109  

 

(129.8

%)

  76     (536 )   612  

 

(114.2

%)

Free Cash Flow excluding Economic Stimulus Act impacts

$ 448 $ 529 $ (81 ) (15.3 %) $ 2,041 $ 1,819 $ 222 12.2 %
                                                             

NM—Not meaningful.

(a)  Refer to Note 2 to the accompanying consolidated financial statements for a definition of Adjusted OIBDA and Free Cash Flow.

(b)  Additional information on the Economic Stimulus Acts is available in the Trending Schedules posted on the Company’s website at www.twc.com/investors.

 

Net Debt and Mandatorily Redeemable Preferred Equity totaled $23.5 billion as of September 30, 2012 compared to $21.6 billion as of December 31, 2011, as the cash used for the acquisition of Insight, share repurchases and dividend payments was greater than Free Cash Flow and the proceeds from the sale of SpectrumCo’s advanced wireless spectrum licenses.

                                                           
                                                 
(in millions; unaudited) 9/30/2012 12/31/2011
Long-term debt $ 25,187 $ 24,320
Debt due within one year   1,876     2,122  
Total debt 27,063 26,442
Cash and equivalents   (3,853 )   (5,177 )
Net debt (a) 23,210 21,265
Mandatorily redeemable preferred equity   300     300  
Net debt and mandatorily redeemable preferred equity $ 23,510 $ 21,565
                 

(a)  Net debt is defined as total debt less cash and equivalents.

 

RETURN OF CAPITAL

Time Warner Cable returned $673 million to shareholders during the quarter. Share repurchases during the third quarter of 2012 totaled $500 million or 5.7 million shares of common stock. As of September 30, 2012, $2.8 billion remained under the Company’s share repurchase authorization. Time Warner Cable also paid a regular dividend of $0.56 per share of common stock, $173 million in aggregate, during the third quarter of 2012.

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