NEW YORK, NY – Time Warner Cable Inc. (NYSE: TWC) today reported financial results for its first quarter ended March 31, 2013.
Time Warner Cable Chief Executive Officer Glenn Britt said: “Business Services continues to perform very well, generating 25% year-over-year revenue growth, and is on track for another terrific year. In Residential Services, we’re executing on our revitalization plans to build a fundamentally stronger and more agile operation. As a result, I remain very excited about the long-term prospects for this business.”
Revenue for the first quarter of 2013 increased 6.6% from the first quarter of 2012 to $5.5 billion. Residential services revenue increased 4.0% to $4.6 billion, business services revenue grew 25.2% to $537 million, advertising revenue increased 8.1% to $228 million and other revenue grew 62.3% to $99 million.
Revenue for the first quarter of 2013 benefited from two additional months of revenue from Insight Communications Company, Inc., which was acquired on February 29, 2012, as detailed below.
Excluding the impact from Insight revenue during the first two months of the first quarter of 2013:
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 premium network 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 decrease in average revenue per subscriber, partially offset by growth in 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.
Advertising revenue increased primarily as a result of growth in revenue from advertising inventory sold on behalf of other video distributors.
Other revenue increased primarily as a result of fees from distributors of the Company’s two Los Angeles regional sports networks, which were launched on October 1, 2012.
Adjusted Operating Income before Depreciation and Amortization (“Adjusted OIBDA”) for the first quarter of 2013 increased 2.1% from the first quarter of 2012 to $1.9 billion. The increase was driven by revenue growth, partially offset by a 9.3% increase in operating expenses.
Operating expenses grew primarily due to higher employee costs and video programming expenses, as well as the costs associated with the Company’s Los Angeles regional sports networks and the advertising inventory sold on behalf of other video distributors, both of which are included in other direct operating costs in cost of revenue.
- Employee costs were up 10.4% to $1.2 billion primarily due to two additional months of costs associated with Insight that are included in the results for the first quarter of 2013, as well as a net increase in headcount driven by growth in business services and higher compensation costs per employee. Employee medical and pension costs increased $13 million and $9 million, respectively.
- Video programming expenses grew 6.8% to $1.2 billion due to an increase in average monthly video programming costs per video subscriber and two additional months of Insight costs, offset, in part, by a decline in video subscribers. Average monthly video programming costs per video subscriber increased 7.5% year-over-year to $33.16 for the first quarter of 2013, primarily driven by contractual rate increases and the carriage of new networks.
- Voice costs were up 4.7% to $156 million primarily as a result of an increase in voice subscribers and two additional months of Insight costs, partially offset by a decrease in delivery costs per subscriber related to the in-sourcing of voice transport, switching and interconnection services.
Operating Income for the first quarter of 2013 increased 1.7% from the first quarter of 2012 to $1.1 billion driven by higher Adjusted OIBDA and a decrease in merger-related and restructuring costs, partially offset by higher depreciation and amortization expenses primarily as a result of two additional months of Insight costs associated with its property, plant and equipment and customer relationship intangible assets. 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.
Adjusted OIBDA less Capital Expenditures for the first three months of 2013 totaled $1.1 billion, a 2.1% decrease over the first three months of 2012, due to higher capital expenditures, partially offset by higher Adjusted OIBDA. Capital Expenditures were $770 million for the first three months of 2013.
Net Income Attributable to TWC Shareholders was $401 million, or $1.35 per basic common share and $1.34 per diluted common share, for the first quarter of 2013 compared to $382 million, or $1.21 per basic common share and $1.20 per diluted common share, for the first quarter of 2012.
Adjusted Net Income Attributable to TWC Shareholders and Adjusted Diluted EPS, which exclude certain items affecting the comparability of TWC’s results for 2013 and 2012 detailed in Note 1 to the accompanying consolidated financial statements, were $423 million and $1.41, respectively, for the first quarter of 2013 compared to $414 million and $1.30, respectively, for the first quarter of 2012. Adjusted Diluted EPS for the first quarter of 2013 benefited from lower average common shares outstanding as a result of share repurchases under the Company’s stock repurchase program.
Free Cash Flow for the first three months of 2013 decreased 7.9% to $661 million from $718 million in the first three months of 2012, due mainly to an increase in capital expenditures, partially offset by higher cash provided by operating activities. Cash Provided by Operating Activities for the first three months of 2013 was $1.4 billion, a 0.8% increase from the first three months of 2012. This increase was driven by higher Adjusted OIBDA and lower net interest payments, partially offset by an increase in working capital requirements.
Net Debt and Mandatorily Redeemable Preferred Equity, which totaled $23.6 billion as of March 31, 2013, increased slightly from December 31, 2012 as Free Cash Flow and the impact of a favorable change in exchange rates on foreign currency denominated debt were more than offset by the cash used for share repurchases and the dividend payment.
RETURN OF CAPITAL
Time Warner Cable returned $855 million to shareholders during the first quarter of 2013. Share repurchases during the first quarter of 2013 totaled $660 million or 7.1 million shares of common stock. As of March 31, 2013, $1.6 billion remained under the Company’s share repurchase authorization. Time Warner Cable also paid a regular dividend of $0.65 per share of common stock, $195 million in aggregate, during the first quarter of 2013.
Non-GAAP Financial Measures
The Company refers to certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), including OIBDA, Adjusted OIBDA, Adjusted OIBDA less capital expenditures, Adjusted net income attributable to TWC shareholders, Adjusted Diluted EPS and Free Cash Flow. Refer to Note 2 to the accompanying consolidated financial statements for a discussion of the Company’s use of non-GAAP financial measures.
About Time Warner Cable
Time Warner Cable Inc. (NYSE: TWC) is among the largest providers of video, high-speed data and voice services in the United States, connecting more than 15 million customers to entertainment, information and each other. Time Warner Cable Business Class offers data, video and voice services to businesses of all sizes, cell tower backhaul services to wireless carriers and enterprise-class, cloud-enabled hosting, managed applications and services. Time Warner Cable Media, the advertising arm of Time Warner Cable, offers national, regional and local companies innovative advertising solutions. More information about the services of Time Warner Cable is available at www.twc.com, www.twcbc.com and www.twcmedia.com.
Additional details on financial and subscriber metrics are included in the Trending Schedules and Presentation Slides posted on the Company’s Investor Relations website at www.twc.com/investors.
Information on Conference Call
Time Warner Cable’s earnings conference call can be heard live at 8:30 am ET on Thursday, April 25, 2013. To listen to the call, visit www.twc.com/investors.
Caution Concerning Forward-Looking Statements
This document includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations or beliefs, and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological, strategic and/or regulatory factors, and other factors affecting the operations of Time Warner Cable Inc. More detailed information about these factors may be found in filings by Time Warner Cable Inc. with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Time Warner Cable is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Justin Venech (212) 364-8242
Tom Robey (212) 364-8218
Laraine Mancini (212) 364-8202