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TheStreet Open House

Time Warner Cable Reports 2013 Third-Quarter Results

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

Time Warner Cable Chairman and CEO Glenn Britt said: "As I leave the business after 41 years, I am proud of this company and its many accomplishments. We have tremendous opportunity ahead, and I have full confidence in Rob and his team."

SELECTED FINANCIAL RESULTS

                                                                           
(in millions, except per share data;       3rd Quarter     Year-to-Date 9/30
unaudited)     Change     Change
          2013     2012 $     % 2013     2012 $     %
Revenue $ 5,518 $ 5,363 $ 155 2.9% $ 16,543 $ 15,901 $ 642 4.0%
Adjusted OIBDA (a) $ 2,005 $ 1,946 $ 59 3.0% $ 5,954 $ 5,830 $ 124 2.1%
Operating Income $ 1,160 $ 1,094 $ 66 6.0% $ 3,407 $ 3,276 $ 131 4.0%
Diluted EPS (b) $ 1.84 $ 2.60 $ (0.76) (29.2%) $ 4.81 $ 5.22 $ (0.41) (7.9%)
Adjusted Diluted EPS (a) $ 1.69 $ 1.41 $ 0.28 19.9% $ 4.80 $ 4.19 $ 0.61 14.6%
Cash provided by operating activities $ 1,209 $ 1,195 $ 14 1.2% $ 4,154 $ 4,115 $ 39 0.9%
Capital expenditures $ 774 $ 773 $ 1 0.1% $ 2,371 $ 2,191 $ 180 8.2%
Free Cash Flow (a) $ 440 $ 423 $ 17 4.0% $ 1,833 $ 1,965 $ (132) (6.7%)
Return of capital (c) $ 732 $ 673 $ 59 8.8% $ 2,416 $ 1,822 $ 594 32.6%
                                                               

(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 2.9% year over year, driven primarily by growth of 20.5% in business services revenue and 14.2% in residential high-speed data revenue.
  • Average monthly revenue per residential customer relationship (ARPU) grew 1.9% to $105.06 driven by robust growth in ARPU per new customer relationship.
  • Adjusted OIBDA grew 3.0% year over year to $2.0 billion and Operating Income increased 6.0% to $1.2 billion.
  • Adjusted Diluted EPS increased 19.9% to $1.69. Diluted EPS decreased 29.2% to $1.84, driven primarily by 2012 SpectrumCo and Clearwire-related gains.
  • Capital expenditures in the first nine months totaled $2.4 billion, consistent with the Company’s expectation of full-year capital spending of $3.2 billion.
  • Free Cash Flow in the first nine months of 2013 was $1.8 billion. The Company continues to expect full-year Free Cash Flow to be approximately $2.5 billion.
  • Time Warner Cable repurchased 4.8 million shares of its common stock, bringing total repurchases since program inception to nearly 86 million shares. In the first nine months of 2013, the Company returned more than 130% of Free Cash Flow to shareholders.
  • The Company announced its agreement to acquire DukeNet – a regional fiber optic network company primarily serving the Carolinas. The acquisition is expected to close during the first quarter of 2014.
  • Subscriber activity in the quarter was negatively impacted by programming disputes with CBS and Journal Communications.
  • Residential wideband high-speed data subscribers (which includes the 30, 50, 75 and 100 Mbps tiers) doubled year over year to 719,000 subscribers.
  • The Company continued to expand its WiFi initiative; aggressive deployment in New York City increased total TWC WiFi TM access points to 24,000. Through the Cable WiFi® network, most TWC high-speed data customers have access to 200,000 hotspots across the U.S.
  • At the end of the third quarter, Time Warner Cable had 32,000 IntelligentHome customers. The Company launched this service in New York City in October, expanding its availability to over 90% of the Company’s footprint.

DETAILED FINANCIAL RESULTS

Revenue for the third quarter of 2013 increased 2.9% from the third quarter of 2012 to $5.5 billion. Residential services revenue increased 0.7% to $4.6 billion and business services revenue grew 20.5% to $594 million, while advertising revenue decreased 4.2% to $253 million and other revenue grew 58.6% to $92 million.

                                                                           
(in millions; unaudited)       3rd Quarter     Year-to-Date 9/30 (a)
              Change     Change
2013     2012 $     % 2013     2012 $     %
Residential services revenue:  
Video $ 2,600 $ 2,722 $ (122) (4.5%) $ 7,945 $ 8,230 $ (285) (3.5%)
High-speed data 1,461 1,279 182 14.2% 4,291 3,744 547 14.6%
Voice 498 530 (32) (6.0%) 1,534 1,577 (43) (2.7%)
Other   20   17   3 17.6%   52   47   5 10.6%
Total residential services revenue 4,579 4,548 31 0.7% 13,822 13,598 224 1.6%
 
Business services revenue:
Video 87 83 4 4.8% 258 240 18 7.5%
High-speed data 282 235 47 20.0% 806 667 139 20.8%
Voice 110 83 27 32.5% 308 219 89 40.6%
Wholesale transport 65 47 18 38.3% 181 132 49 37.1%
Other   50   45   5 11.1%   143   128   15 11.7%
Total business services revenue 594 493 101 20.5% 1,696 1,386 310 22.4%
 
Advertising revenue 253 264 (11) (4.2%) 741 740 1 0.1%
 
Other revenue   92   58   34 58.6%   284   177   107 60.5%
 
Total revenue $ 5,518 $ 5,363 $ 155 2.9% $ 16,543 $ 15,901 $ 642 4.0%
                                                               

(a)

    Revenue for the nine months ended September 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 year-over-year growth in the number of high-speed data subscribers.
  • Residential video revenue decreased driven by declines in video subscribers and premium network revenue (which was reduced by approximately $15 million of subscriber credits issued in connection with a temporary blackout of Showtime resulting from a dispute with CBS), 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 fewer voice subscribers.

Business services revenue

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

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