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Time Warner Cable Reports 2013 Second-Quarter Results

Stocks in this article: TWC

Time Warner Cable Inc. (NYSE: TWC) today reported financial results for its second quarter ended June 30, 2013.

“Time Warner Cable continues to build significant shareholder value by investing in rapidly expanding Business Services and by revitalizing our Residential Services operations,” said Glenn Britt, Chairman and CEO. “I am pleased with our progress in operations and expect to see the benefits in the second half of the year and in 2014.”

SELECTED FINANCIAL RESULTS

 
 

(in millions, except per share data;

        2nd Quarter       Year-to-Date 6/30

unaudited)

      Change       Change
2013       2012 $       % 2013       2012 $       %
Total Revenue $ 5,550 $ 5,404 $ 146 2.7 % $ 11,025 $ 10,538 $ 487 4.6 %
Adjusted OIBDA (a) $ 2,037 $ 2,011 $ 26 1.3 % $ 3,949 $ 3,884 $ 65 1.7 %
Operating Income $ 1,187 $ 1,140 $ 47 4.1 % $ 2,247 $ 2,182 $ 65 3.0 %
Diluted EPS (b) $ 1.64 $ 1.43 $ 0.21 14.7 % $ 2.98 $ 2.63 $ 0.35 13.3 %
Adjusted Diluted EPS (a) $ 1.69 $ 1.48 $ 0.21 14.2 % $ 3.10 $ 2.78 $ 0.32 11.5 %
Cash provided by operating activities $ 1,551 $ 1,537 $ 14 0.9 % $ 2,945 $ 2,920 $ 25 0.9 %
Capital expenditures $ 827 $ 712 $ 115 16.2 % $ 1,597 $ 1,418 $ 179 12.6 %
Free Cash Flow (a) $ 732 $ 824 $ (92 ) (11.2 %) $ 1,393 $ 1,542 $ (149 ) (9.7 %)
Return of capital (c) $ 829 $ 617 $ 212 34.4 % $ 1,684 $ 1,149 $ 535 46.6 %
 

(a)

  Refer to Note 3 to the accompanying consolidated financial statements for definitions of Adjusted OIBDA, Adjusted Diluted EPS and Free Cash Flow and below for reconciliations.

(b)

Diluted EPS represents net income per diluted common share attributable to TWC common shareholders.

(c)

Return of capital represents dividends paid and share repurchases and does not reflect the fees, commissions or other costs associated with the stock repurchase program.
 

QUARTERLY HIGHLIGHTS

  • Total Company revenue grew 2.7% year over year, driven primarily by growth of 21.8% in business services revenue and 12.5% in residential high-speed data revenue.
  • Average monthly revenue per residential customer relationship (ARPU) grew 1.2% to $105.21.
  • Capital expenditures in the first half totaled $1.6 billion, consistent with the Company’s plans for full-year capital spending of $3.2 billion.
  • In the second quarter, Time Warner Cable repurchased 6.6 million shares of its common stock, bringing total repurchases since program inception to more than 81 million shares. In the first half of 2013, the Company returned more than 120% of Free Cash Flow to shareholders.
  • Free Cash Flow in the first half of 2013 was $1.4 billion. The Company is raising its expectation for full-year Free Cash Flow to approximately $2.5 billion.
  • Residential wideband high-speed data subscribers (which includes the 30, 50, 75 and 100 Mbps tiers) more than doubled year over year to 608,000 subscribers.
  • The Company continued to make progress with its Wi-Fi initiative; Aggressive deployment in New York City increased total access points to 19,000.
  • Time Warner Cable has IntelligentHome available in approximately 80% of its footprint and has 24,000 customers. Second quarter net additions were the strongest since its launch.
  • Time Warner Cable announced new versions of its popular TWC TV product for the Roku Streaming Player, Samsung Smart TVs and Microsoft’s Xbox. These new apps are designed to enable customers to enjoy Time Warner Cable’s video product on millions of customer-owned devices.
  • The Company completed the operational integration of the former Insight systems in the second quarter.
  • Business services reached a milestone in the quarter, delivering backhaul service to more than 10,000 cell towers.

DETAILED FINANCIAL RESULTS

Revenue for the second quarter of 2013 increased 2.7% from the second quarter of 2012 to $5.6 billion. Residential services revenue increased 0.3% to $4.6 billion and business services revenue grew 21.8% to $565 million, while advertising revenue decreased 1.9% to $260 million and other revenue grew 60.3% to $93 million.

 
 
(in millions; unaudited)         2nd Quarter     Year-to-Date 6/30 (a)
    Change     Change
2013     2012 $     % 2013     2012 $     %
Residential services revenue:
Video $ 2,674 $ 2,797 $ (123 ) (4.4 %) $ 5,345 $ 5,508 $ (163 ) (3.0 %)
High-speed data 1,424 1,266 158 12.5 % 2,830 2,465 365 14.8 %
Voice 517 539 (22 ) (4.1 %) 1,036 1,047 (11 ) (1.1 %)
Other   17   15   2   13.3 %   32   30   2   6.7 %
Total residential services revenue 4,632 4,617 15 0.3 % 9,243 9,050 193 2.1 %
 
Business services revenue:
Video 87 81 6 7.4 % 171 157 14 8.9 %
High-speed data 268 224 44 19.6 % 524 432 92 21.3 %
Voice 102 73 29 39.7 % 198 136 62 45.6 %
Wholesale transport 61 44 17 38.6 % 116 85 31 36.5 %
Other   47   42   5   11.9 %   93   83   10   12.0 %
Total business services revenue 565 464 101 21.8 % 1,102 893 209 23.4 %
 
Advertising revenue 260 265 (5 ) (1.9 %) 488 476 12 2.5 %
 
Other revenue   93   58   35   60.3 %   192   119   73   61.3 %
 
Total revenue $ 5,550 $ 5,404 $ 146 2.7 % $ 11,025 $ 10,538 $ 487 4.6 %
 

(a)

  Revenue for the six months ended June 30, 2013 benefited from two additional months of Insight Communications Company, Inc. revenue, which is discussed further in Note 2 to the accompanying consolidated financial statements.
 

Residential services revenue

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

  • The growth in residential high-speed data revenue was the result of an increase in average revenue per subscriber, primarily due to an increase in equipment rental charges and a greater percentage of subscribers purchasing higher-priced tiers of service, as well as growth in high-speed data subscribers.
  • Residential video revenue decreased driven by declines in video subscribers and transactional video-on-demand revenue, partially offset by price increases and a greater percentage of subscribers purchasing higher-priced tiers of service.
  • Residential voice revenue decreased due to a decline in average revenue per subscriber and lower voice subscribers.

Business services revenue

Business services revenue growth was primarily due to increases in high-speed data and voice subscribers and growth in cell tower backhaul revenue.

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