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TIME WARNER CABLE REPORTS 2012 FIRST-QUARTER RESULTS

Release Date: 04/26/2012

(NEW YORK, NY) – Time Warner Cable Inc. (NYSE: TWC) today reported financial results for its first quarter ended March 31, 2012.

Time Warner Cable Chief Executive Officer Glenn Britt said:  “Time Warner Cable's first quarter results reflect continued strong performance, and residential Internet and business services were standouts.  Now that we have closed the Insight acquisition, our increased cash flow is available to fuel further investments in the business and capital returns to our shareholders.”


FINANCIAL RESULTS
Revenues
for the first quarter of 2012 increased 6.4% from the first quarter of 2011 to $5.1 billion.  Residential services revenues increased 4.1% year-over-year to $4.4 billion, business services revenues grew 37.5% to $429 million, while advertising revenues increased 7.1% to $211 million and other revenues grew 3.4% to $61 million.

Revenues for the first quarter of 2012 benefited from the acquisitions of Insight Communications Company, Inc. (on February 29, 2012), the NewWave Communications cable systems (during the fourth quarter of 2011) and NaviSite, Inc. (during the second quarter of 2011), as detailed below.

 

Excluding the impacts from acquisitions, residential services revenue growth was primarily driven by an increase in high-speed data 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 an increase in average revenues per subscriber (due to both price increases and a greater percentage of subscribers purchasing higher-priced tiers of service). 
  • Residential video revenues decreased slightly as price increases, a greater percentage of subscribers purchasing higher-priced tiers of service and increased revenues from equipment rental charges and DVR service were more than offset by a decline in video subscribers and revenues from transactional video-on-demand and premium channels. 
  • Residential voice revenues remained essentially flat as growth in voice subscribers was offset by a decrease in average revenues per subscriber. 


Excluding the impacts from acquisitions, business services revenue growth was due primarily to increases in high-speed data and voice subscribers and growth in cell tower backhaul and Metro Ethernet revenues.

Excluding the impacts from acquisitions, advertising revenues increased primarily as a result of a year-over-year increase in revenues from advertising inventory sold on behalf of other video distributors.
 

Adjusted Operating Income before Depreciation and Amortization (“Adjusted OIBDA”) for the first quarter of 2012 increased 8.2% from the first quarter of 2011 to $1.9 billion.  The increase was driven by revenue growth, partially offset by a 5.3% increase in operating expenses. 

Operating expenses grew primarily due to higher employee costs, video programming expenses and other operating costs, partially offset by a decrease in voice costs.  Employee costs were up 10.1% to $1.1 billion, primarily as a result of increased headcount (which increased by approximately 3,500 employees, including Insight, NaviSite and NewWave employees) and higher compensation costs per employee.  Pension and equity-based compensation costs increased $15 million and $12 million, respectively.  Business services employee costs increased 42.7% year-over-year.  Video programming expenses grew 4.6% to $1.1 billion due to contractual rate increases and the acquisition of Insight offset, in part, by an organic decline in video subscribers.  For the first quarter of 2011, video programming costs were reduced by approximately $18 million as a result of changes in cost estimates for programming services carried without a contract.  Average monthly video programming costs per video subscriber increased 5.9% year-over-year to $30.85 for the first quarter of 2012.  Voice costs were down 10.8% to $149 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 organic increase in subscribers.

Operating Income for the first quarter of 2012 increased 6.9% from the first quarter of 2011 to $1.0 billion.  Note 1 to the accompanying consolidated financial statements details certain items affecting the comparability of TWC’s results for the first quarters of 2012 and 2011.  Excluding these items, first-quarter 2012 Operating Income would have grown 10.8% to $1.1 billion, driven by higher Adjusted OIBDA, partially offset by higher depreciation and amortization expenses primarily as a result of the Company’s recent acquisitions (largely Insight).

Adjusted OIBDA less Capital Expenditures for the first three months of 2012 totaled $1.2 billion, a 9.3% increase over the first three months of 2011, due to higher Adjusted OIBDA, partially offset by higher capital expenditures.  Capital Expenditures were $706 million for the first three months of 2012, a 6.5% increase over the first three months of 2011, largely reflecting higher support capital spending in residential services and other. 


Net Income Attributable to TWC Shareholders was $382 million, or $1.21 per basic common share and $1.20 per diluted common share, for the first quarter of 2012 compared to $325 million, or $0.94 per basic common share and $0.93 per diluted common share, for the first quarter of 2011.  Note 1 to the accompanying consolidated financial statements details certain items affecting the comparability of TWC’s net income attributable to TWC shareholders for the first quarter of 2012 and 2011, the most significant of which for 2012 was a negative $0.09 per diluted common share impact from merger-related and restructuring costs and, for 2011, was a negative $0.06 per diluted common share net impact from expired Time Warner Inc. stock options.

Adjusted Net Income Attributable to TWC Shareholders and Adjusted Diluted EPS, which exclude the items detailed in Note 1, were $414 million and $1.30, respectively, for the first quarter of 2012 compared to $352 million and $1.01, respectively, for the first quarter of 2011. These 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.  Additionally, Adjusted Diluted EPS for the first quarter of 2012 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 2012 decreased 22.5% to $718 million from $927 million in the first three months of 2011, due mainly to lower cash provided by operating activities and an increase in capital expenditures.  Cash Provided by Operating Activities for the first three months of 2012 was $1.4 billion, an 11.9% decrease from $1.6 billion in the first three months of 2011.  This decrease was driven by a change in working capital (primarily due to a significant income tax refund received in the first quarter of 2011 and an increase in net interest payments), partially offset by higher Adjusted OIBDA.

Net Debt and Mandatorily Redeemable Preferred Equity totaled $24.5 billion as of March 31, 2012 compared to $21.6 billion as of December 31, 2011, as the cash used for the acquisition of Insight, share repurchases and the dividend payment was greater than Free Cash Flow.

RETURN OF CAPITAL
Time Warner Cable returned $532 million to shareholders during the quarter.  Share repurchases during the first quarter of 2012 totaled $353 million or 4.8 million shares of common stock.  As of March 31, 2012, $3.7 billion remained under the Company’s share repurchase authorization.  Time Warner Cable also paid a regular dividend of $0.56 per share of common stock, $179 million in aggregate, during the first quarter of 2012.

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, 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.twc.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.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 26, 2012. 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.

Please click here to read the full Time Warner Cable earnings PDF.


Contacts:
Corporate Communications      
Alex Dudley            (212) 364-8229 
Justin Venech       (212) 364-8242 

Investor Relations 
Tom Robey            (212) 364-8218
Laraine Mancini    (212) 364-8202

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