(NEW YORK, NY) – Time Warner Cable Inc. (NYSE: TWC) today reported financial results for its fourth quarter and full year ended December 31, 2011.
Time Warner Cable Chief Executive Officer Glenn Britt said: “Time Warner Cable’s 2011 results demonstrate the continued strength of our business amidst rapid change in technology and the consumer marketplace. We have a full slate of strategic and operational initiatives planned for the year ahead, all designed to generate strong cash flow, enable future growth and provide attractive returns to our shareholders.”
Revenues for the fourth quarter of 2011 increased 4.0% from the fourth quarter of 2010 to $5.0 billion. Residential services revenues increased 2.6% year-over-year to $4.3 billion, business services revenues grew 37.2% to $409 million, while advertising revenues decreased 10.0% to $242 million and other revenues declined 1.7% to $58 million.
Full-year 2011 revenues increased 4.3% year-over-year to $19.7 billion. Residential services revenues grew 2.7% year-over-year to $17.1 billion, business services revenues increased 32.7% to $1.5 billion, while advertising revenues were flat at $880 million and other revenues increased 1.7% to $233 million.
In both the fourth quarter and full year of 2011, residential services revenue growth was driven by increases in high-speed data and voice revenues. The growth in residential high-speed data revenues was the result of growth in high-speed data subscribers and increases in average revenues per subscriber (due to both price increases and a greater percentage of subscribers purchasing higher-priced tiers of service). Residential voice revenues increased as a result of an increase in voice subscribers, partially offset by a slight decrease in average revenues per subscriber. Residential video revenues were essentially flat as price increases and a greater percentage of subscribers purchasing higher-priced tiers of service, as well as increased revenues from equipment rentals and DVR service, were offset by a decline in video subscribers and lower revenues from premium channels. Residential video revenue growth for the full year of 2011 was also impacted by lower transactional video-on-demand revenues.
The increase in business services revenues for both the quarter and full year was due primarily to growth in high-speed data and voice subscribers; an increase in cell tower backhaul revenues; and revenues from NaviSite, Inc., which was acquired in the second quarter of 2011 ($34 million for fourth-quarter 2011 and $94 million for full-year 2011).
Advertising revenues decreased for the quarter primarily as a result of a year-over-year decline in political advertising revenues. For the full year, advertising revenues were flat as a year-over-year increase in revenues from advertising inventory sold on behalf of other video distributors and growth in non-political local advertising offset a decline in political advertising revenues. Political advertising was $5 million in the fourth quarter of 2011 and $15 million in the full year of 2011 compared to $42 million and $74 million in the comparable periods in 2010.
Fourth-quarter 2011 Adjusted Operating Income before Depreciation and Amortization (“Adjusted OIBDA”) increased 8.7% from the fourth quarter of 2010 to $1.9 billion driven by revenue growth, partially offset by a 1.3% increase in operating expenses. In particular, employee costs were up 6.4% to $1.0 billion and video programming expenses grew 2.1% to $1.1 billion, while voice costs were down 18.0% to $141 million and marketing costs decreased 7.8% to $153 million.
Full-year 2011 Adjusted OIBDA increased 5.1% from 2010 to $7.2 billion. The year-over-year increase in Adjusted OIBDA was driven by revenue growth, partially offset by a 3.8% increase in operating expenses. For the full year, employee costs were up 6.0% to $4.1 billion and video programming expenses grew 3.1% to $4.3 billion, while voice costs were down 11.1% to $595 million.
In both the fourth-quarter and full-year 2011, employee costs were up primarily as a result of higher headcount in business services, including the addition of NaviSite employees, and increased compensation costs per employee. Employee costs for 2010 included $12 million of executive severance costs recorded in the fourth quarter. Business services employee costs increased 38.4% and 34.3% year-over-year in the fourth-quarter and full-year 2011, respectively. Video programming expenses grew primarily due to contractual rate increases and increased retransmission consent expense offset, in part, by a decline in video subscribers. Additionally, video programming costs for the full-year 2011 and 2010 were each reduced by approximately $25 million as a result of changes in cost estimates for programming services carried without a contract, reversals of previously accrued programming audit reserves and certain contract settlements. Average monthly video programming costs per video subscriber increased 5.6% year-over-year to $29.76 for the fourth quarter of 2011 and 6.8% year-over-year to $29.59 for the full year of 2011. Voice costs were down due to a decrease in delivery costs per subscriber related to the in-sourcing of voice transport, switching and interconnection services, partially offset by an increase in subscribers.
Fourth-quarter 2011 Operating Income increased 3.5% from the fourth quarter of 2010 to $1.0 billion and full-year 2011 Operating Income increased 10.3% from 2010 to $4.1 billion. Note 1 to the accompanying consolidated financial statements details certain items affecting the comparability of TWC’s results for 2011 and 2010. Excluding these items, fourth-quarter 2011 Operating Income would have grown 12.1% to $1.1 billion, primarily driven by higher Adjusted OIBDA, partially offset by higher depreciation expense. Full-year 2011 Operating Income would have grown 12.1% to $4.2 billion, primarily due to higher Adjusted OIBDA and lower amortization expense.
Adjusted OIBDA less Capital Expenditures for the full year of 2011 totaled $4.3 billion, an 8.7% increase over the full year of 2010, primarily due to higher Adjusted OIBDA. Capital Expenditures were $2.9 billion in 2011, essentially flat compared to 2010, largely reflecting higher business services capital spending, offset by lower residential services, advertising and other capital spending. The decline in residential services capital spending was primarily attributable to lower spending on customer premise equipment, partially offset by higher support capital and scalable infrastructure spending.
Fourth-quarter 2011 Net Income Attributable to TWC Shareholders was $564 million, or $1.76 per basic common share and $1.75 per diluted common share, compared to $392 million, or $1.10 per basic common share and $1.09 per diluted common share, in the prior year quarter. Full-year 2011 net income attributable to TWC shareholders was $1.7 billion, or $5.02 per basic common share and $4.97 per diluted common share, compared to $1.3 billion, or $3.67 per basic common share and $3.64 per diluted common share, in the prior year.
Note 1 to the accompanying consolidated financial statements details certain items affecting the comparability of TWC’s results for 2011 and 2010. Excluding these items, fourth-quarter 2011 net income attributable to TWC shareholders would have been $450 million, or $1.39 per diluted common share, compared to $357 million, or $0.99 per diluted common share, in the prior year quarter. The fourth-quarter 2011 year-over-year increases were primarily due to higher Operating Income and lower other expense, net, (reflecting a decline in losses from Clearwire Communications LLC as the Company’s investment was reduced to $0 during the third quarter of 2011), partially offset by higher interest expense, net, and income tax provision. For the full year of 2011, excluding such items, net income attributable to TWC shareholders would have been $1.6 billion, or $4.68 per diluted common share, compared to $1.3 billion, or $3.72 per diluted common share, in the prior year. The full-year 2011 year-over-year increases were primarily due to higher Operating Income, partially offset by higher interest expense, net, and income tax provision. Net income per diluted common share attributable to TWC common shareholders for both the fourth quarter and full year of 2011 also 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 full-year 2011 increased 20.2% to $2.7 billion from $2.3 billion in 2010, due mainly to higher cash provided by operating activities. Cash Provided by Operating Activities for the full-year 2011 was $5.7 billion, a 9.0% increase from $5.2 billion in 2010. This increase was driven by lower income tax payments and higher income tax refunds as a result of bonus depreciation and an increase in Adjusted OIBDA, partially offset by increases in pension plan contributions and net interest payments.
Net Debt and Mandatorily Redeemable Preferred Equity totaled $21.6 billion as of December 31, 2011 compared to $20.4 billion as of December 31, 2010, as the cash used for share repurchases, dividend payments and the acquisitions of NaviSite and NewWave Communications was greater than Free Cash Flow.
RETURN OF CAPITAL
Time Warner Cable returned $520 million and $3.3 billion to shareholders during the fourth-quarter and full-year 2011, respectively. Share repurchases totaled $366 million, or 5.7 million shares of common stock, during the fourth quarter of 2011 and totaled $2.6 billion, or 37.3 million shares of common stock, during the full year of 2011. From the inception of the Company’s stock repurchase program through December 31, 2011, the Company repurchased $3.1 billion, or 45.3 million shares, of common stock and, as of December 31, 2011, $854 million remained under the Company’s share repurchase authorization. Time Warner Cable also paid regular dividends of $154 million and $642 million during the fourth quarter and full year of 2011, respectively.
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 voice 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 voice services to businesses of all sizes, cell tower backhaul services to wireless carriers and, through its NaviSite subsidiary, managed and outsourced information technology solutions 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 and Presentation Slides 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, January 26, 2012. 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 Reports 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.
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