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Time Warner Cable Reports 2014 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, 2014.

Time Warner Cable Chairman and CEO Rob Marcus said: “Time Warner Cable posted another very good quarter. We delivered the best second-quarter subscriber volumes in years, accelerated ARPU growth and made terrific progress on our strategic and operating initiatives. I want to commend our team for remaining laser focused on executing our operating plan, while at the same time working hard to complete our merger with Comcast.”

                                             

SELECTED CONSOLIDATED FINANCIAL RESULTS

 
 
(in millions, except per share data; 2nd Quarter Year-to-Date 6/30
unaudited) Change Change
2014 2013 $ % 2014 2013 $ %
Revenue $ 5,726 $ 5,550 $ 176 3.2 % $ 11,308 $ 11,025 $ 283 2.6 %
Adjusted OIBDA (a) $ 2,054 $ 2,037 $ 17 0.8 % $ 4,034 $ 3,949 $ 85 2.2 %
Operating Income (b) $ 1,163 $ 1,187 $ (24 ) (2.0 %) $ 2,255 $ 2,247 $ 8 0.4 %
Diluted EPS (c) $ 1.76 $ 1.64 $ 0.12 7.3 % $ 3.46 $ 2.98 $ 0.48 16.1 %
Adjusted Diluted EPS (a) $ 1.89 $ 1.69 $ 0.20 11.8 % $ 3.68 $ 3.10 $ 0.58 18.7 %
Cash provided by operating activities (b) $ 1,695 $ 1,551 $ 144 9.3 % $ 3,092 $ 2,945 $ 147 5.0 %
Capital expenditures $ 1,240 $ 827 $ 413 49.9 % $ 2,074 $ 1,597 $ 477 29.9 %
Free Cash Flow (a)(b)     $ 459     $ 732     $ (273 )     (37.3 %)       $ 1,088     $ 1,393     $ (305 )     (21.9 %)

(a)

  Refer to Note 4 to the accompanying consolidated financial statements for definitions of Adjusted OIBDA, Adjusted Diluted EPS and Free Cash Flow and below for reconciliations.

(b)

Operating Income is reduced by merger-related and restructuring costs of $61 million and $27 million for the second quarters of 2014 and 2013, respectively, and $141 million and $58 million for the six months ended June 30, 2014 and 2013, respectively. Cash provided by operating activities and Free Cash Flow are reduced by merger-related and restructuring payments of $29 million and $35 million for the second quarters of 2014 and 2013, respectively, and $87 million and $64 million for the six months ended June 30, 2014 and 2013, respectively.

(c)

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

HIGHLIGHTS

Financial Highlights

  • Second-quarter 2014 revenue grew 3.2% year over year, driven primarily by growth of 22.3% in business services revenue and 12.8% growth in residential high-speed data revenue. Sequential quarterly revenue growth of $144 million was the highest organic growth in seven years.
  • Adjusted Diluted EPS increased 11.8% to $1.89. Diluted EPS increased 7.3% to $1.76.
  • Second-quarter 2014 average monthly revenue per residential customer relationship (ARPU) grew 1.7% to $106.98. Residential high-speed data ARPU increased 9.7% to $46.92.

Operational Highlights

  • Overall second-quarter subscriber performance was the best in years.
    • Residential customer relationship net declines of 34,000 – best second quarter in five years
    • Residential triple play net additions of 42,000 – best second quarter in two years
    • Residential high-speed data net additions of 67,000 – best second quarter in four years
    • Residential voice net additions of 79,000 – best second quarter in five years
    • Residential video net declines of 152,000 – best second quarter in three years
    • Business primary service unit and customer relationship net additions of 37,000 and 21,000, respectively – highest quarter ever
  • “TWC Maxx” rollout, including conversion to an all-digital network and high-speed data speed increases to as much as 300 Mbps, continues to progress in New York City and Los Angeles and has recently begun in Austin, Texas.
  • TWC’s cloud-based guide with an advanced VOD portal was installed on 5.8 million set-top boxes at the end of the second quarter.
  • Business Services continued to benefit from the addition of buildings and cell towers to the network, expansion of the sales force and improved sales rep productivity.
  • The Company accelerated its pace of investment in advanced set-top boxes, cable modems capable of supporting TWC Maxx speeds, expanded VOD capacity and network reliability.

CHANGES IN BASIS OF PRESENTATION

Effective in the first quarter of 2014, the Company determined it has three reportable segments: Residential Services, Business Services and Other Operations. Additionally, during the first quarter of 2014, the Company revised its categorization of operating costs and expenses to be consistent with how such costs and expenses are presented to management and to provide a more meaningful presentation. The Company has recast its financial information and disclosures for the prior periods to include (i) disclosure of segment results, which are discussed further below in “Detailed Segment Results” and Note 3 to the accompanying consolidated financial statements, and (ii) the revised categorization of operating costs and expenses, which had no impact on total operating costs and expenses, Operating Income or net income attributable to TWC shareholders for any period presented.

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