(NEW YORK, NY) – Time Warner Cable Inc. (NYSE: TWC) today reported financial results for its first quarter ended March 31, 2011.
Time Warner Cable Chief Executive Officer Glenn Britt said: “This is an exciting time for Time Warner Cable. Our high-speed data product just crossed the 10 million subscriber threshold and is quickly becoming the anchor product in the eyes of consumers. At the same time, new technology is making it possible for us to provide an even better video experience to our customers. Nowhere is this more evident than in our iPad app, which we launched last month to overwhelmingly positive consumer reviews. As our first quarter performance demonstrates, we continue to generate solid results, invest to further improve the value of our services and return cash to our shareholders.”
Revenues for the first quarter of 2011 increased 5.0% from the first quarter of 2010 to $4.8 billion. Subscription revenues grew 4.6% year-over-year to $4.6 billion, driven by a 3.5% increase in residential subscription revenues and a 23.2% increase in commercial subscription revenues. Advertising revenues increased 13.9% to $197 million.
Residential subscription revenue growth was driven by increases in high-speed data, voice and video revenues. The growth in residential high-speed data revenues was the result of growth in high-speed data subscribers and, to a lesser extent, increases in average revenues per subscriber (due to both price increases and improved subscriber mix). Residential voice revenues increased as a result of an increase in Digital Phone subscribers. The growth in residential video revenues was driven by increases in average revenues per subscriber (due to price increases, improved subscriber mix and increased DVR service revenues), partially offset by a year-over-year decline in video subscribers. Commercial subscription revenue growth was due primarily to an increase in cell tower backhaul revenues, increases in voice and high-speed data subscribers and higher Metro Ethernet revenues. Advertising revenue growth was driven by year-over-year increases in a wide range of categories, most significantly automotive and media, in addition to growth in revenues from advertising inventory sold on behalf of other video distributors.
Adjusted Operating Income before Depreciation and Amortization (“Adjusted OIBDA”) rose 3.6% over the first quarter of 2010 to $1.7 billion. The increase was driven by revenue growth, partially offset by a 5.7% increase in operating expenses, primarily due to higher employee costs, video programming expenses and consulting and professional fees. Employee costs were up 5.9% to $1.0 billion (including commercial employee costs which increased 25.4%) and video programming expenses grew 2.6% to $1.1 billion. Employee costs increased primarily as a result of compensation increases and higher commercial headcount. Video programming costs increased due to contractual rate increases and incremental retransmission consent expense offset, in part, by a decline in video subscribers. Video programming costs for the first-quarter 2011 were reduced by approximately $18 million due to changes in cost estimates for programming services previously carried without a contract.
Operating Income was up 14.7% over the first quarter of 2010 to $975 million driven by higher Adjusted OIBDA and lower amortization expense.
Adjusted OIBDA less Capital Expenditures for the first three months of 2011 totaled $1.1 billion, a 14.2% increase over the first three months of 2010, due to lower capital expenditures and higher Adjusted OIBDA. Capital Expenditures were $663 million in the first three months of 2011, a 9.9% decrease from the first three months of 2010, largely reflecting lower residential capital spending. The decline in residential capital spending was primarily attributable to lower spending on customer premise equipment and upgrades/rebuilds, partially offset by higher support capital spending.
Net Income Attributable to TWC Shareholders was $325 million, or $0.94 per basic common share and $0.93 per diluted common share, for the first quarter of 2011 compared to $214 million, or $0.60 per basic and diluted common share, for the first quarter of 2010.
Free Cash Flow for the first three months of 2011 increased 42.2% to $927 million from $652 million in the first three months of 2010, due mainly to higher cash provided by operating activities and lower capital expenditures. Cash Provided by Operating Activities for the first three months of 2011 was $1.6 billion, a 13.3% increase from $1.4 billion in the first three months of 2010. This increase was driven by a change in working capital (primarily a $270 million tax refund related to 2010 bonus depreciation) and higher Adjusted OIBDA.
Net Debt and Mandatorily Redeemable Preferred Equity totaled $20.3 billion as of March 31, 2011 compared to $20.4 billion as of December 31, 2010, as Free Cash Flow was largely used for share repurchases and cash dividend payments.
RETURN OF CAPITAL
Share repurchases during the first quarter of 2011 totaled $829 million, or 12.0 million shares of common stock. As of March 31, 2010, approximately $2.7 billion remained under the Company’s share repurchase authorization. Time Warner Cable also paid regular dividends of $167 million in the first quarter of 2011.
In the first quarter, high-speed data subscriber net additions were 189,000 and Digital Phone subscriber net additions were 84,000, while video subscriber net declines were 65,000, resulting in an increase in Primary Service Units (“PSUs”) of 208,000 for the quarter. Triple play subscribers increased by 83,000 in the first quarter, and double and triple play subscribers totaled 8.6 million, or 59.5% of total customer relationships as of March 31, 2011.
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 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 phone services in the United States, connecting more than 14 million customers to entertainment, information and each other. Time Warner Cable Business Class offers data, video, and phone services to businesses of all sizes, cell tower backhaul services to wireless carriers, and through its NaviSite subsidiary, enterprise-class hosting, managed application, messaging and cloud 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.timewarnercable.com, www.twcbc.com, www.navisite.com, and www.twcmedia.com.
Additional details on financial and subscriber metrics are included in the Trending Schedules posted on the Company’s Investor Relations website at www.timewarnercable.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 28, 2011. To listen to the call, visit www.timewarnercable.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.
Alex Dudley (212) 364-8229
Justin Venech (212) 364-8242
Tom Robey (212) 364-8218
Laraine Mancini (212) 364-8202