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Time Warner Cable Reports 2012 Fourth-Quarter And Full-Year Results

In both the fourth-quarter and full-year 2012:

  • Employee costs were up primarily 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 and $60 million for the fourth quarter and full year of 2012, respectively, primarily due to the decline in interest rates to historically low levels.
  • Video programming expenses grew 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 5.1% year-over-year to $31.28 for the fourth quarter of 2012 and 5.2% year-over-year to $31.12 for the full year of 2012, primarily driven by contractual rate increases and the carriage of new networks, partially offset by a decline in transactional video-on-demand costs. For the fourth quarter and full year of 2012, video programming costs were reduced by approximately $20 million and $40 million, respectively, and, for the full year of 2011, video programming costs were reduced by approximately $25 million due to changes in cost estimates for programming services carried during contract negotiations, changes in programming audit reserves and certain contract settlements.
  • Voice costs were up 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.
  • Other operating costs increased as a result of costs associated with Insight and the Los Angeles regional sports networks, as well as increases in a number of categories.

Fourth-quarter 2012 Operating Income increased 13.6% from the fourth quarter of 2011 to $1.2 billion and full-year 2012 Operating Income increased 9.2% from 2011 to $4.4 billion, both driven by higher Adjusted OIBDA and the fourth-quarter 2011 wireless-related asset impairments, 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. Operating Income growth was also impacted by merger-related and restructuring costs, which, on a year-over-year basis, decreased $17 million for the fourth quarter of 2012 and increased $45 million for the full year of 2012.

   
 
(in millions; unaudited)         4th Quarter     Full Year
        Change         Change
2012 2011 $       % 2012 2011 $     %
Adjusted OIBDA (a) $ 1,994 $ 1,889 $ 105 5.6 % $ 7,824 $ 7,226 $ 598 8.3 %
Adjusted OIBDA margin (b) 36.4 % 37.8 % 36.6 % 36.7 %
Merger-related and restructuring costs (17 ) (34 ) 17 (50.0 %) (115 ) (70 ) (45 ) 64.3 %
Asset impairments (c)       (60 )   60   (100.0 %)       (60 )   60   (100.0 %)
OIBDA (a) 1,977 1,795 182 10.1 % 7,709 7,096 613 8.6 %
Depreciation (777 ) (756 ) (21 ) 2.8 % (3,154 ) (2,994 ) (160 ) 5.3 %
Amortization   (31 )   (10 )   (21 ) 210.0 % (110 ) (33 )   (77 ) 233.3 %
Operating Income $ 1,169 $ 1,029 $ 140 13.6 % $ 4,445 $ 4,069 $ 376 9.2 %
   
(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 revenue.
(c) Refer to Note 1 to the accompanying consolidated financial statements for additional information.
 

Adjusted OIBDA less Capital Expenditures for the full year of 2012 totaled $4.7 billion, a 10.3% increase over the full year of 2011, primarily due to higher Adjusted OIBDA, partially offset by higher capital expenditures. Capital Expenditures, which include Insight-related capital spending of approximately $100 million, were $3.1 billion in 2012.

 

 

(in millions; unaudited)         4th Quarter     Full Year
        Change         Change
2012 2011 $     % 2012 2011 $     %
Adjusted OIBDA (a) $ 1,994 $ 1,889 $ 105 5.6 % $ 7,824 $ 7,226 $ 598 8.3 %
Capital expenditures   (904 )   (942 )   38 (4.0 %) (3,095 ) (2,937 )   (158 ) 5.4 %
Adjusted OIBDA less capital expenditures (a) $ 1,090 $ 947 $ 143 15.1 % $ 4,729 $ 4,289 $ 440 10.3 %
 
(a)   Refer to Note 2 to the accompanying consolidated financial statements for a definition of Adjusted OIBDA and Adjusted OIBDA less capital expenditures.
 

Fourth-quarter 2012 Net Income Attributable to TWC Shareholders was $513 million, or $1.70 per basic common share and $1.68 per diluted common share, compared to $564 million, or $1.76 per basic common share and $1.75 per diluted common share, in the prior year quarter. Full-year 2012 net income attributable to TWC shareholders was $2.2 billion, or $6.97 per basic common share and $6.90 per diluted common share, compared to $1.7 billion, or $5.02 per basic common share and $4.97 per diluted common share, in the prior year.

Fourth-quarter Adjusted Net Income Attributable to TWC Shareholders and Adjusted Diluted EPS, which exclude certain tax matters, a 2011 asset impairment and other items affecting the comparability of TWC’s results for 2012 and 2011 (detailed in Note 1 to the accompanying consolidated financial statements), were $479 million and $1.57, respectively, for the fourth quarter of 2012 compared to $447 million and $1.38, respectively, for the fourth quarter of 2011. These increases were primarily due to higher Operating Income, partially offset by higher income tax provision.

Full-year Adjusted net income attributable to TWC shareholders and Adjusted Diluted EPS, which exclude the 2012 investment-related gains (SpectrumCo, LLC and Clearwire Corporation), certain tax matters and other items detailed in Note 1, were $1.8 billion and $5.75, respectively, for 2012 compared to $1.6 billion and $4.69, respectively, for 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 LLC as the Company’s investment was reduced to $0 during the third quarter of 2011.

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