NEW YORK, NY, October 27, 2011 – Time Warner Cable Inc. (NYSE: TWC) today reported financial results for its third quarter ended September 30, 2011.
Time Warner Cable Chief Executive Officer Glenn Britt said: “We posted steady financial progress in the third quarter, powered by residential broadband and business services, and we’re pleased with the stronger subscriber results in August and September. We continue to focus our efforts on maximizing our growth opportunities.”
Revenues for the third quarter of 2011 increased 3.7% from the third quarter of 2010 to $4.9 billion. Residential services revenues increased 2.0% year-over-year to $4.3 billion, business services revenues increased 34.8% to $387 million, while advertising revenues decreased 3.1% to $216 million and other revenues increased 1.8% to $58 million.
Residential services revenue growth was driven by increases in high-speed data and voice revenues, partially offset by a slight decline in video 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 decrease in average revenues per subscriber. Residential video revenues decreased slightly as price increases and a greater percentage of subscribers purchasing higher-priced tiers of service, as well as increased revenues from equipment rental and installation charges and DVR service, were more than offset by a decline in video subscribers and revenues from premium channels and transactional video-on-demand.
Business services revenue growth was due primarily to increases in high-speed data and voice subscribers, an increase in cell tower backhaul revenues and $34 million of revenues from NaviSite, Inc., which was acquired in the second quarter of 2011.
Advertising revenues decreased primarily as a result of a year-over-year decline in political advertising revenues and weakness in the overall advertising market in TWC’s operating areas, partially offset by an increase in revenues from advertising inventory sold on behalf of other video distributors.
Adjusted Operating Income before Depreciation and Amortization (“Adjusted OIBDA”) for the third quarter of 2011 increased 3.9% from the third quarter of 2010 to $1.8 billion. The increase was driven by revenue growth, partially offset by a 3.6% increase in operating expenses.
Operating expenses grew primarily due to higher employee costs and video programming expenses, partially offset by a decrease in voice costs. Employee costs were up 6.4% to $1.0 billion, primarily as a result of compensation increases and higher headcount in business services, including NaviSite. Business services employee costs increased 38.2%. Video programming expenses grew 3.5% to $1.1 billion due to contractual rate increases and increased retransmission consent expense offset, in part, by a decline in video subscribers. Additionally, video programming costs were reduced by approximately $10 million and $15 million in the third quarter of 2011 and 2010, respectively, 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. Voice costs were down 19.0% to $136 million 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.
Operating Income for the third quarter of 2011 increased 8.1% from the third quarter of 2010 to $1.0 billion driven by higher Adjusted OIBDA and lower amortization expense.
Adjusted OIBDA less Capital Expenditures for the first nine months of 2011 totaled $3.3 billion, an 11.8% increase over the first nine months of 2010, due to higher Adjusted OIBDA and lower capital expenditures.
Capital Expenditures were $2.0 billion for the first nine months of 2011, a 7.1% decrease over the first nine months of 2010, largely reflecting lower residential capital spending. This 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 $356 million, or $1.09 per basic common share and $1.08 per diluted common share, for the third quarter of 2011 compared to $360 million, or $1.00 per basic and diluted common share, for the third quarter of 2010.
Free Cash Flow for the first nine months of 2011 increased 45.5% to $2.4 billion from $1.6 billion in the first nine months of 2010, due mainly to higher cash provided by operating activities and lower capital expenditures.
Cash Provided by Operating Activities for the first nine months of 2011 was $4.3 billion, a 15.1% increase from $3.8 billion in the first nine months of 2010. This increase was driven by a change in working capital (primarily higher income tax refunds and lower income tax payments as a result of bonus depreciation, partially offset by an increase in net interest payments) and higher Adjusted OIBDA.
Net Debt and Mandatorily Redeemable Preferred Equity totaled $21.2 billion as of September 30, 2011 compared to $20.4 billion as of December 31, 2010, as the cash used for share repurchases, dividend payments and the acquisition of NaviSite was greater than Free Cash Flow.
RETURN OF CAPITAL
Time Warner Cable returned $731 million to shareholders during the quarter. Share repurchases during the third quarter of 2011 totaled $573 million or 8.0 million shares of common stock. As of September 30, 2011, $1.2 billion remained under the Company’s share repurchase authorization. Time Warner Cable also paid regular dividends of $158 million during the third quarter of 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 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 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, October 27, 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 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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