Time Warner Cable Reports 2012 Third-Quarter Results

  Time Warner Cable Reports 2012 Third-Quarter Results

Business Wire

NEW YORK -- November 05, 2012

Time Warner Cable Inc. (NYSE:TWC) today reported financial results for its
third quarter ended September 30, 2012.

Time Warner Cable Chief Executive Officer Glenn Britt said: “Our third-quarter
results were good, with most trends similar to the preceding quarter. Our
operating results were driven by continued strong performance in residential
high-speed data and business services, an acceleration in high-margin
political advertising and the contributions from our Insight systems. During
the quarter, we remained focused on investing in growing our business, while
at the same time ramping capital returns to our shareholders.”

Britt continued, “Our sympathies go out to those suffering in the wake of
Hurricane Sandy, and we are thankful for the efforts of our employees who
worked in many ways to help keep our customers informed and connected during
the storm, as well as those who have been dealing with the many
after-effects.”

FINANCIAL RESULTS

Revenues for the third quarter of 2012 increased 9.2% from the third quarter
of 2011 to $5.4 billion. Residential services revenues increased 7.0% to $4.5
billion and business services revenues grew 27.4% to $493 million, while
advertising revenues increased 22.2% to $264 million.

                                                       
                                                                    
(in
millions;      3rd Quarter                         Year-to-Date 9/30
unaudited)
                                   Change                                Change
               2012      2011      $       %       2012       2011       $         %
Residential
services
revenues:
  Video        $ 2,722   $ 2,624   $ 98    3.7%    $ 8,230    $ 7,961    $ 269     3.4%
  High-speed     1,279     1,119     160   14.3%     3,744      3,328      416     12.5%
  data
  Voice          530       494       36    7.3%      1,577      1,484      93      6.3%
  Other         17       13       4     30.8%    47        36        11      30.6%
Total
residential      4,548     4,250     298   7.0%      13,598     12,809     789     6.2%
services
revenues
                                                                                   
Business
services
revenues:
  Video          83        73        10    13.7%     240        212        28      13.2%
  High-speed     235       187       48    25.7%     667        531        136     25.6%
  data
  Voice          83        52        31    59.6%     219        140        79      56.4%
  Wholesale      47        39        8     20.5%     132        110        22      20.0%
  transport
  Other         45       36       9     25.0%    128       67        61      91.0%
Total
business         493       387       106   27.4%     1,386      1,060      326     30.8%
services
revenues
                                                                                   
Advertising      264       216       48    22.2%     740        638        102     16.0%
revenues
                                                                                   
Other           58       58       —     —        177       175       2       1.1%
revenues
                                                                                   
Total          $ 5,363   $ 4,911   $ 452   9.2%    $ 15,901   $ 14,682   $ 1,219   8.3%
revenues

Revenues for the third quarter of 2012 benefited from acquisitions, as
detailed below.

                                                     
                                                             
(in millions;             3rd Quarter 2012
unaudited)
                          Historical   Organic      Acquisitions                Total
                          TWC^(a)      %            Insight   NewWave   Total   TWC
                                       Change^(b)
Residential services
revenues:
  Video                   $   2,573       (1.9 %)   $  138    $   11    $ 149   $ 2,722
  High-speed data             1,209       8.0  %       66         4       70      1,279
  Voice                       489         (1.0 %)      38         3       41      530
  Other                      17          30.8 %      —         —      —      17
Total residential             4,288       0.9  %       242        18      260     4,548
services revenues
Business services             474         22.5 %       17         2       19      493
revenues
Advertising revenues          253         17.1 %       11         —       11      264
Other revenues               58          —           —         —      —      58
Total revenues            $   5,073       3.3  %    $  270    $   20    $ 290   $ 5,363
                                                                
(a)Historical TWC amounts exclude the results of (i) Insight Communications Company,
Inc. (acquired on February 29, 2012) and (ii) the cable systems acquired from NewWave
Communications on November 1, 2011.
(b)Organic % Change represents the change between the Historical TWC amounts for the
third quarter of 2012 and TWC’s results for the third quarter of 2011 included in the
table on page 1.

                                                                  
                                                                            
(in millions;       Year-to-Date 9/30/2012
unaudited)
                    Historical   Organic      Acquisitions                                   Total
                    TWC^(a)      %            Insight^(c)   NewWave   NaviSite^(d)   Total   TWC
                                 Change^(b)
Residential
services
revenues:
  Video             $  7,872        (1.1 %)   $    325      $   33    $     —        $ 358   $ 8,230
  High-speed data      3,577        7.5  %         154          13          —          167     3,744
  Voice                1,480        (0.3 %)        89           8           —          97      1,577
  Other               45           25.0 %        2           —          —         2      47
Total residential      12,974       1.3  %         570          54          —          624     13,598
services revenues
Business services      1,294        22.1 %         38           5           49         92      1,386
revenues
Advertising            714          11.9 %         26           —           —          26      740
revenues
Other revenues        175          —             2           —          —         2      177
Total revenues      $  15,157       3.2  %    $    636      $   59    $     49       $ 744   $ 15,901
                                                                          
(a)Historical TWC amounts include the results of NaviSite, Inc. (acquired on April 21, 2011) for
the period of April 21 through September 30, 2012 and exclude the results of (i) NaviSite from
January 1 through April 20, 2012, (ii) Insight and (iii) the cable systems acquired from NewWave.
(b)Organic % Change represents the change between the Historical TWC amounts for the nine months
ended September 30, 2012 and TWC’s results for the nine months ended September 30, 2011 included in
the table on page 1.
(c)Insight amounts represent the financial results of Insight from the date of acquisition
(February 29, 2012) through September 30, 2012.
(d)NaviSite amounts represent NaviSite’s results for the period from January 1 through April 20,
2012.

Excluding the impact from acquisitions:

Residential services revenues

Residential services revenue growth was primarily driven by an increase in
high-speed data revenues, partially offset by declines in video and voice
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 driven by declines in video
    subscribers and transactional video-on-demand revenues, partially offset
    by price increases, a greater percentage of subscribers purchasing
    higher-priced tiers of service and increased revenues from equipment
    rental charges.
  *Residential voice revenues decreased slightly due to a decrease in average
    revenues per subscriber, primarily due to promotional offers, partially
    offset by growth in voice subscribers.

Business services revenues

Business services revenue growth was primarily due to increases in high-speed
data and voice subscribers and growth in Metro Ethernet revenues.

Advertising revenues

Advertising revenues increased primarily as a result of increases in political
advertising and 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 2012 increased 9.2% from the third quarter of
2011 to $1.9 billion. The increase was driven by revenue growth, partially
offset by a 9.2% increase in operating expenses.

Operating expenses grew primarily due to higher employee costs, video
programming expenses, other operating costs and voice costs. Employee costs
were up 10.0% to $1.1 billion, due to higher headcount (primarily driven by
acquisitions and organic growth in business services, partially offset by an
organic decline in residential services) and higher compensation costs per
employee. Pension costs increased $15 million. Video programming expenses grew
8.2% to $1.2 billion due to an increase in average monthly video programming
costs per video subscriber and a net increase in video subscribers (primarily
due to the acquisition of Insight offset, in part, by an organic decline in
video subscribers). Average monthly video programming costs per video
subscriber increased 6.1% year-over-year to $31.45 for the third quarter of
2012, primarily driven by contractual rate increases, partially offset by a
decline in transactional video-on-demand costs. For the third quarter of 2012
and 2011, video programming costs were reduced by approximately $5 million and
$10 million, respectively, due to net changes in cost estimates for
programming services carried without a contract, changes in programming audit
reserves and certain contract settlements. Voice costs were up 11.0% to $151
million, primarily as a result of an increase in voice subscribers due to both
organic growth and the Insight acquisition, 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 third quarter of 2012 increased 9.2% from the third
quarter of 2011 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). 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.

                                                                      
                                                                                   
(in millions;      3rd Quarter                                 Year-to-Date 9/30
unaudited)
                                           Change                                      Change
                   2012        2011        $         %         2012        2011        $          %
Adjusted           $ 1,946     $ 1,782     $ 164     9.2   %   $ 5,830     $ 5,337     $ 493      9.2   %
OIBDA^(a)
Adjusted OIBDA     36.3    %   36.3    %                       36.7    %   36.4    %
margin^(b)
  Merger-related
  and               (32   )    (21   )    (11 )   52.4  %    (98   )    (36   )    (62  )   172.2 %
  restructuring
  costs
OIBDA^(a)            1,914       1,761       153     8.7   %   5,732       5,301         431      8.1   %
  Depreciation       (789  )     (750  )     (39 )   5.2   %   (2,377  )   (2,238  )     (139 )   6.2   %
  Amortization      (31   )    (9    )    (22 )   244.4 %   (79     )   (23     )    (56  )   243.5 %
Operating Income   $ 1,094     $ 1,002     $ 92      9.2   %   $ 3,276     $ 3,040     $ 236      7.8   %
                                                                            
(a)Refer to Note 2 to the accompanying consolidated financial statements for a definition of OIBDA and
Adjusted OIBDA.
(b)Adjusted OIBDA margin is defined as Adjusted OIBDA as a percentage of total revenues.


Adjusted OIBDA less Capital Expenditures for the first nine months of 2012
totaled $3.6 billion, an 8.9% increase over the first nine months of 2011, due
to higher Adjusted OIBDA, partially offset by higher capital expenditures.
Capital Expenditures were $2.2 billion for the first nine months of 2012, a
9.8% increase over the first nine months of 2011, largely reflecting higher
spending in line extensions, support capital, customer premise equipment and
scalable infrastructure.

                                                                      
                                                                                   
(in millions;      3rd Quarter                                 Year-to-Date 9/30
unaudited)
                                           Change                                      Change
                   2012        2011        $          %        2012        2011        $          %
Adjusted           $ 1,946     $ 1,782     $ 164      9.2  %   $ 5,830     $ 5,337     $ 493      9.2 %
OIBDA^(a)
   Capital          (773  )    (632  )    (141 )   22.3 %   (2,191  )   (1,995  )    (196 )   9.8 %
   expenditures
Adjusted OIBDA
less capital       $ 1,173     $ 1,150     $ 23       2.0  %   $ 3,639     $ 3,342     $ 297      8.9 %
expenditures^(a)
                                                                        
(a)Refer to Note 2 to the accompanying consolidated financial statements for a definition of Adjusted
OIBDA and Adjusted OIBDA less capital expenditures.


Net Income Attributable to TWC Shareholders was $808 million, or $2.64 per
basic common share and $2.60 per diluted common share, for the third quarter
of 2012 compared to $356 million, or $1.09 per basic common share and $1.08
per diluted common share, for the third quarter of 2011. The growth in net
income attributable to TWC shareholders resulted primarily from a change in
other income (expense), net, and growth in Operating Income, partially offset
by higher income tax provision (which included a net benefit from certain tax
matters) and interest expense, net. The change in other income (expense), net,
was primarily due to third-quarter 2012 investment-related gains (SpectrumCo,
LLC and Clearwire Corporation) and a decline in losses from Clearwire
Communications LLC as the Company’s investment was reduced to $0 during the
third quarter of 2011.

Adjusted Net Income Attributable to TWC Shareholders and Adjusted Diluted EPS,
which exclude the investment-related gains (SpectrumCo and Clearwire) and
certain other items affecting the comparability of TWC’s results for the third
quarters of 2012 and 2011 detailed in Note 1 to the accompanying consolidated
financial statements, were $438 million and $1.41, respectively, for the third
quarter of 2012 compared to $366 million and $1.11, respectively, for the
third quarter of 2011. These increases were primarily due to higher Operating
Income and a change in other income (expense), net, partially offset by higher
income tax provision and interest expense, net. The change in other income
(expense), net, was primarily due to a decline in losses from Clearwire
Communications as the Company’s investment was reduced to $0 during the third
quarter of 2011. Additionally, Adjusted Diluted EPS for the third quarter of
2012 benefited from lower average common shares outstanding as a result of
share repurchases under the Company’s stock repurchase program.

                                                          
                                                                        
(in millions,
except per share   3rd Quarter                           Year-to-Date 9/30
data; unaudited)
                                    Change                                  Change
                   2012     2011     $        %          2012      2011      $        %
Net income
attributable to    $ 808    $ 356    $ 452    127.0%     $ 1,642   $ 1,101   $ 541    49.1%
TWC shareholders
Adjusted net
income
attributable to    $ 438    $ 366    $ 72     19.7%      $ 1,318   $ 1,126   $ 192    17.1%
TWC
shareholders^(a)
                                                                                      
Net income per
common share
attributable to
TWC common
shareholders:
    Basic          $ 2.64   $ 1.09   $ 1.55   142.2%     $ 5.27    $ 3.28    $ 1.99   60.7%
    Diluted        $ 2.60   $ 1.08   $ 1.52   140.7%     $ 5.22    $ 3.24    $ 1.98   61.1%
Adjusted Diluted   $ 1.41   $ 1.11   $ 0.30   27.0%      $ 4.19    $ 3.32    $ 0.87   26.2%
EPS^(a)
                                                               
(a)Refer to Note 2 to the accompanying consolidated financial statements for a definition
of Adjusted net income attributable to TWC shareholders and Adjusted Diluted EPS.


Free Cash Flow for the first nine months of 2012 decreased 16.6% to $2.0
billion from $2.4 billion in the first nine 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 nine months
of 2012 was $4.1 billion, a 5.3% decrease from $4.3 billion in the first nine
months of 2011. This decrease was driven by a significant income tax refund
(received in the first quarter of 2011) and increases in income tax payments,
net interest payments and pension plan contributions, partially offset by
higher Adjusted OIBDA.

                                                                       
                                                                                     
(in millions;    3rd Quarter                                    Year-to-Date 9/30
unaudited)
                                         Change                                         Change
                 2012        2011        $          %           2012        2011        $          %
Adjusted         $ 1,946     $ 1,782     $ 164      9.2    %    $ 5,830     $ 5,337     $ 493      9.2    %
OIBDA^(a)
Net interest       (456  )     (408  )     (48  )   11.8   %    (1,302  )   (1,128  )     (174 )   15.4   %
payments
Net income tax
refunds            (214  )     (54   )     (160 )   296.3  %    (291    )   167           (458 )  (274.3 %)
(payments)
Pension plan       (150  )     (77   )     (73  )   94.8   %      (152  )     (79   )     (73  )   92.4   %
contributions
All other,
net, including
working            69          21          48      228.6  %      30          47          (17  )  (36.2  %)
capital
changes
Cash provided
by operating       1,195       1,264       (69  )   (5.5   %)     4,115       4,344       (229 )   (5.3   %)
activities
Add:
  Income taxes
  paid on          —           —           —        NM            —           —           —        NM
  investment
  sales
  Excess tax
  benefit from
  exercise of      13          5           8        160.0  %      73          46          27       58.7   %
  stock
  options
Less:
  Capital          (773  )     (632  )     (141 )   22.3   %    (2,191  )   (1,995  )     (196 )   9.8    %
  expenditures
  Cash paid
  for other        (11   )     (22   )     11       (50.0  %)     (27   )     (36   )     9        (25.0  %)
  intangible
  assets
  Other           (1    )    (2    )    1       (50.0  %)    (5    )    (4    )    (1   )   25.0   %
Free Cash          423         613         (190 )   (31.0  %)     1,965       2,355       (390 )   (16.6  %)
Flow^(a)
  Economic
  Stimulus Act    25        (84   )    109    (129.8 %)    76        (536  )    612    (114.2 %)
  impacts^(b)
Free Cash Flow
excluding
Economic         $ 448       $ 529       $ (81  )   (15.3  %)   $ 2,041     $ 1,819     $ 222      12.2   %
Stimulus Act
impacts
                                                                            
NM—Not meaningful.
(a)Refer to Note 2 to the accompanying consolidated financial statements for a definition of Adjusted
OIBDA and Free Cash Flow.
(b)Additional information on the Economic Stimulus Acts is available in the Trending Schedules posted on
the Company’s website at www.twc.com/investors.


Net Debt and Mandatorily Redeemable Preferred Equity totaled $23.5 billion as
of September 30, 2012 compared to $21.6 billion as of December 31, 2011, as
the cash used for the acquisition of Insight, share repurchases and dividend
payments was greater than Free Cash Flow and the proceeds from the sale of
SpectrumCo’s advanced wireless spectrum licenses.

                                         
                                          
(in millions; unaudited)                               9/30/2012    12/31/2011
Long-term debt                                         $ 25,187     $ 24,320
Debt due within one year                                1,876      2,122  
Total debt                                               27,063       26,442
Cash and equivalents                                    (3,853 )    (5,177 )
Net debt^(a)                                             23,210       21,265
Mandatorily redeemable preferred equity                 300        300    
Net debt and mandatorily redeemable preferred equity   $ 23,510     $ 21,565
                                                                     
(a)Net debt is defined as total debt less cash and equivalents.


RETURN OF CAPITAL

Time Warner Cable returned $673 million to shareholders during the quarter.
Share repurchases during the third quarter of 2012 totaled $500 million or 5.7
million shares of common stock. As of September 30, 2012, $2.8 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, $173 million
in aggregate, during the third quarter of 2012.

SUBSCRIBER METRICS

                                           
                                            
(in thousands)                                          Net
                                                        Additions
                                            6/30/2012   (Declines)   9/30/2012
Residential services subscribers:
  Video                                        12,299       (140 )      12,159
  High-speed data                              10,775       85          10,860
  Voice                                        4,990        —           4,990
Business services subscribers:
  Video                                        185          —           185
  High-speed data                              433          13          446
  Voice                                        198          14          212
                                                                        
Single play subscribers                        5,950        (14  )      5,936
Double play subscribers                        5,099        (29  )      5,070
Triple play subscribers                       4,244       14        4,258
Customer relationships                         15,293       (29  )      15,264
                                                              
For definitions related to the Company’s subscriber metrics, refer to the
Trending Schedules posted on the Company’s website at www.twc.com/investors.

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 Monday, November 5, 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 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.

TIME WARNER CABLE INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
                                                    
                                                  September 30,   December 31,
                                                2012            2011
                                                (in millions)
ASSETS
Current assets:
  Cash and equivalents                            $  3,853        $  5,177
  Receivables, less allowances of $82 million and
  $62 million as of September 30, 2012 and           899             767
  December 31, 2011, respectively
  Deferred income tax assets                         372             267
  Other current assets                              238           187     
Total current assets                                 5,362           6,398
Investments                                          88              774
Property, plant and equipment, net                   14,510          13,905
Intangible assets subject to amortization, net       666             228
Intangible assets not subject to amortization        26,011          24,272
Goodwill                                             2,893           2,247
Other assets                                        555           452     
Total assets                                      $  50,085      $  48,276  
                                                                     
LIABILITIES AND EQUITY
Current liabilities:
  Accounts payable                                $  458          $  545
  Deferred revenue and subscriber-related            191             169
  liabilities
  Accrued programming expense                        875             807
  Current maturities of long-term debt               1,876           2,122
  Mandatorily redeemable preferred equity issued     300             —
  by a subsidiary
  Other current liabilities                         1,834         1,727   
Total current liabilities                            5,534           5,370
Long-term debt                                       25,187          24,320
Mandatorily redeemable preferred equity issued by    —               300
a subsidiary
Deferred income tax liabilities, net                 11,262          10,198
Other liabilities                                    485             551
TWC shareholders’ equity:
  Common stock, $0.01 par value, 303.3 million
  and 315.0 million shares issued and outstanding    3               3
  as of September 30, 2012 and December 31, 2011,
  respectively
  Additional paid-in capital                         7,707           8,018
  Retained earnings                                  440             68
  Accumulated other comprehensive loss, net         (541    )      (559    )
Total TWC shareholders’ equity                       7,609           7,530
Noncontrolling interests                            8             7       
Total equity                                        7,617         7,537   
Total liabilities and equity                      $  50,085      $  48,276  

See accompanying notes.

TIME WARNER CABLE INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
                                          
                               Three Months Ended      Nine Months Ended
                               September 30,           September 30,
                               2012       2011        2012        2011
                               (in millions, except per share data)
Revenues                       $ 5,363     $ 4,911     $ 15,901     $ 14,682
Costs and expenses:
   Costs of revenues^(a)         2,499       2,286       7,377        6,855
   Selling, general and          918         843         2,694        2,490
   administrative^(a)
   Depreciation                  789         750         2,377        2,238
   Amortization                  31          9           79           23
   Merger-related and           32        21        98         36     
   restructuring costs
Total costs and expenses        4,269     3,909     12,625     11,642 
Operating Income                 1,094       1,002       3,276        3,040
Interest expense, net            (402  )     (383  )     (1,204 )     (1,112 )
Other income (expense), net     496       (22   )    493        (84    )
Income before income taxes       1,188       597         2,565        1,844
Income tax provision            (379  )    (241  )    (920   )    (741   )
Net income                       809         356         1,645        1,103
Less: Net income
attributable to                 (1    )    —         (3     )    (2     )
noncontrolling interests
Net income attributable to     $ 808      $ 356      $ 1,642     $ 1,101  
TWC shareholders
                                                                      
Net income per common share
attributable to TWC common
shareholders:
   Basic                       $ 2.64     $ 1.09     $ 5.27      $ 3.28   
   Diluted                     $ 2.60     $ 1.08     $ 5.22      $ 3.24   
Average common shares
outstanding:
   Basic                        305.7     323.8     310.2      333.7  
   Diluted                      310.2     329.1     314.8      339.4  
                                                                      
Cash dividends declared per    $ 0.56     $ 0.48     $ 1.68      $ 1.44   
share of common stock

^(a)Costs of revenues and selling, general and administrative expenses
exclude depreciation.

See accompanying notes.

TIME WARNER CABLE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
                                         
                                                       Nine Months Ended
                                                       September 30,
                                                     2012        2011
                                                       (in millions)
OPERATING ACTIVITIES
Net income                                             $ 1,645      $ 1,103
Adjustments for noncash and nonoperating items:
   Depreciation                                          2,377        2,238
   Amortization                                          79           23
   Pretax gain on sale of investment in Clearwire        (64    )     —
   (Income) loss from equity-method investments, net     (433   )     98
   of cash distributions
   Deferred income taxes                                 409          575
   Equity-based compensation expense                     104          88
   Excess tax benefit from equity-based compensation     (73    )     (46    )
Changes in operating assets and liabilities, net of
acquisitions and dispositions:
   Receivables                                           (31    )     34
   Accounts payable and other liabilities                105          8
   Other changes                                        (3     )    223    
Cash provided by operating activities                   4,115      4,344  
                                               
INVESTING ACTIVITIES
Acquisitions and investments, net of cash acquired       (1,426 )     (333   )
and distributions received
Proceeds from SpectrumCo’s sale of spectrum licenses     1,112        —
Capital expenditures                                     (2,191 )     (1,995 )
Other investing activities                              23         21     
Cash used by investing activities                       (2,482 )    (2,307 )
                                                                      
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt                 2,258        3,227
Repayments of long-term debt                             (1,750 )     —
Repayments of long-term debt assumed in acquisitions     (1,730 )     (44    )
Debt issuance costs                                      (25    )     (24    )
Proceeds from exercise of stock options                  124          109
Taxes paid in cash in lieu of shares issued for          (43    )     (29    )
equity-based compensation
Excess tax benefit from equity-based compensation        73           46
Dividends paid                                           (529   )     (488   )
Repurchases of common stock                              (1,287 )     (2,291 )
Other financing activities                              (48    )    (17    )
Cash provided (used) by financing activities            (2,957 )    489    
                                                                      
Increase (decrease) in cash and equivalents              (1,324 )     2,526
Cash and equivalents at beginning of period             5,177      3,047  
Cash and equivalents at end of period                  $ 3,853     $ 5,573  

See accompanying notes.

                            TIME WARNER CABLE INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 (Unaudited)

1. ITEMS AFFECTING COMPARABILITY

The following items affected the comparability of Time Warner Cable Inc.'s
("TWC" or the "Company") results for the three and nine months ended September
30, 2012 and 2011:

(in millions, except per share data)     Operating             Income     TWC Net     Diluted
                                                                  Tax
           OIBDA^(a)  D&A^(a)    Income      Other^(a)   Provision   Income^(a)   EPS^(a)
3rd Quarter                                                              
2012:
As reported        $ 1,914     $ (820 )   $ 1,094     $ 93        $  (379 )   $  808       $ 2.60
Year-over-year
change, as
reported:
  $                $ 153       $ (61  )   $ 92        $ 498       $  (138 )   $  452       $ 1.52
 %               8.7     %  8.0    %  9.2     %  (123.0 %)  57.3    %  127.0    %   140.7 %
                                                                                             
Items affecting
comparability:
  Merger-related
  and                32          —          32          —            (14  )      18          0.06
  restructuring
  costs
  Gain on sale
  of SpectrumCo      —           —          —           (430 )       169         (261  )     (0.84 )
  licenses^(b)
  Gain on sale
  of investment      —           —          —           (64  )       (19  )      (83   )     (0.27 )
  in
  Clearwire^(c)
  Loss on equity
  award
  reimbursement      —           —          —           7            (3   )      4           0.01
  obligation to
  Time
  Warner^(d)
  Change in net
  deferred
  income tax         —           —          —           —            (63  )      (63   )     (0.20 )
  liability
  effective tax
  rate^(e)
  Impact of
  partnership       —         —        —         —          15        15        0.05  
  basis
  difference^(f)
                                                                        
As adjusted        $ 1,946     $ (820 )   $ 1,126     $ (394 )    $  (294 )   $  438       $ 1.41
Year-over-year
change, as
adjusted:
  $                $ 164       $ (61  )   $ 103       $ 19        $  (50  )   $  72        $ 0.30
 %               9.2     %  8.0    %  10.1    %  (4.6   %)  20.5    %  19.7     %   27.0  %
                                                                                             
3rd Quarter                                                              
2011:
As reported       $ 1,761   $ (759 )  $ 1,002   $ (405 )   $  (241 )  $  356     $ 1.08  
                                                                                             
Items affecting
comparability:
  Merger-related
  and                21          —          21          —            (8   )      13          0.04
  restructuring
  costs
  Gain on equity
  award
  reimbursement      —           —          —           (8   )       3           (5    )     (0.02 )
  obligation to
  Time
  Warner^(d)
  Impact of
  expired Time
  Warner stock       —           —          —           —            2           2           0.01
  options,
  net^(g)
                                                                        
As adjusted       $ 1,782   $ (759 )  $ 1,023   $ (413 )   $  (244 )  $  366     $ 1.11  

(a)OIBDA represents Operating Income before Depreciation and Amortization. D&A represents
depreciation and amortization. Other consists of interest expense, net, other income (expense), net,
and net income attributable to noncontrolling interests. TWC net income represents net income
attributable to TWC shareholders. Diluted EPS represents net income per diluted common share
attributable to TWC common shareholders.
(b)On August 24, 2012, SpectrumCo, LLC (“SpectrumCo”), of which TWC owns 31.2%, sold all of its
advanced wireless spectrum licenses to Cellco Partnership (doing business as Verizon Wireless).
(c)On September 27, 2012, the Company sold all of its investment in Clearwire Corporation
(“Clearwire”), the proceeds of which were received on October 3, 2012. Income tax provision amount
includes a $46 million benefit related to the reversal of a valuation allowance against a deferred
income tax asset associated with the Company’s investment in Clearwire as a result of the Company’s
ability to fully realize the capital losses from the sale of its Clearwire interests by offsetting
capital gains related to SpectrumCo’s sale of spectrum licenses.
(d)Pursuant to an agreement with Time Warner Inc. (“Time Warner”), TWC is obligated to reimburse
Time Warner for the cost of certain Time Warner equity awards held by TWC employees upon exercise or
vesting of such awards.Amounts represent the change in the reimbursement obligation, which
fluctuates primarily with the fair value and expected volatility of Time Warner common stock, and
changes in fair value are recorded in other income (expense), net, in the period of change.
(e)Amount represents a benefit related to a change in the tax rate applied to calculate the
Company’s net deferred income tax liability as a result of an internal reorganization effective on
September 30, 2012.
(f)Amount represents a charge related to the recording of a deferred income tax liability
associated with a partnership basis difference.
(g)Amount represents the impact of the reversal of deferred income tax assets associated with Time
Warner stock option awards held by TWC employees, net of excess tax benefits realized upon the
exercise of TWC stock options or vesting of TWC restricted stock units.

(in millions, except per share data)        Operating               Income     TWC Net     Diluted
                                                                       Tax
            OIBDA^(a)  D&A^(a)      Income      Other^(a)     Provision   Income^(a)   EPS^(a)
Year-to-Date                                                                  
9/30/2012:
As reported         $ 5,732     $ (2,456 )   $ 3,276     $ (714   )    $  (920 )   $  1,642     $ 5.22
Year-over-year
change, as
reported:
  $                 $ 431       $ (195   )   $ 236       $ 484         $  (179 )   $  541       $ 1.98
 %                8.1     %  8.6      %  7.8     %  (40.4    %)  24.2    %  49.1     %   61.1  %
                                                                                                  
Items affecting
comparability:
  Merger-related
  and                 98          —            98          —              (40  )      58          0.18
  restructuring
  costs
  Asset               —           —            —           12             (5   )      7           0.02
  impairments^(b)
  Gain on sale of
  SpectrumCo          —           —            —           (430   )       169         (261  )     (0.83 )
  licenses^(c)
  Gain on sale of
  investment in       —           —            —           (64    )       (19  )      (83   )     (0.26 )
  Clearwire^(d)
  Loss on equity
  award
  reimbursement       —           —            —           5              (2   )      3           0.01
  obligation to
  Time Warner^(e)
  Change in net
  deferred income
  tax liability       —           —            —           —              (63  )      (63   )     (0.20 )
  effective tax
  rate^(f)
  Impact of
  partnership        —         —          —         —            15        15        0.05  
  basis
  difference^(g)
                                                                      
As adjusted         $ 5,830     $ (2,456 )   $ 3,374     $ (1,191 )    $  (865 )   $  1,318     $ 4.19
Year-over-year
change, as
adjusted:
  $                 $ 493       $ (195   )   $ 298       $ 10          $  (116 )   $  192       $ 0.87
 %                9.2     %  8.6      %  9.7     %  (0.8     %)  15.5    %  17.1     %   26.2  %
                                                                                                  
Year-to-Date                                                                  
9/30/2011:
As reported        $ 5,301   $ (2,261 )  $ 3,040   $ (1,198 )   $  (741 )  $  1,101   $ 3.24  
                                                                                                  
Items affecting
comparability:
  Merger-related
  and                 36          —            36          —              (14  )      22          0.07
  restructuring
  costs
  Gain on equity
  award
  reimbursement       —           —            —           (3     )       1           (2    )     —
  obligation to
  Time Warner^(e)
  Impact of
  domestic
  production          —           —            —           —              (9   )      (9    )     (0.03 )
  activities
  deduction
  Impact of
  expired Time
  Warner stock        —           —            —           —              14          14          0.04
  options,
  net^(h)
                                                                      
As adjusted        $ 5,337   $ (2,261 )  $ 3,076   $ (1,201 )   $  (749 )  $  1,126   $ 3.32  

(a)OIBDA represents Operating Income before Depreciation and Amortization. D&A represents depreciation
and amortization. Other consists of interest expense, net, other income (expense), net, and net income
attributable to noncontrolling interests. TWC net income represents net income attributable to TWC
shareholders. Diluted EPS represents net income per diluted common share attributable to TWC common
shareholders.
(b)Amount represents an impairment of TWC’s investment in Canoe Ventures LLC, an equity-method investee
engaged in the development of advanced advertising platforms.
(c)On August 24, 2012, SpectrumCo, of which TWC owns 31.2%, sold all of its advanced wireless spectrum
licenses to Verizon Wireless.
(d)On September 27, 2012, the Company sold all of its investment in Clearwire, the proceeds of which
were received on October 3, 2012. Income tax provision amount includes a $46 million benefit related to
the reversal of a valuation allowance against a deferred income tax asset associated with the Company’s
investment in Clearwire as a result of the Company’s ability to fully realize the capital losses from the
sale of its Clearwire interests by offsetting capital gains related to SpectrumCo’s sale of spectrum
licenses.
(e)Pursuant to an agreement with Time Warner, TWC is obligated to reimburse Time Warner for the cost of
certain Time Warner equity awards held by TWC employees upon exercise or vesting of such awards.Amounts
represent the change in the reimbursement obligation, which fluctuates primarily with the fair value and
expected volatility of Time Warner common stock, and changes in fair value are recorded in other income
(expense), net, in the period of change.
(f)Amount represents a benefit related to a change in the tax rate applied to calculate the Company’s
net deferred income tax liability as a result of an internal reorganization effective on September 30,
2012.
(g)Amount represents a charge related to the recording of a deferred income tax liability associated
with a partnership basis difference.
(h)Amount represents the impact of the reversal of deferred income tax assets associated with Time
Warner stock option awards held by TWC employees, net of excess tax benefits realized upon the exercise
of TWC stock options or vesting of TWC restricted stock units.

2. USE OF NON-GAAP FINANCIAL MEASURES

In discussing its performance, the Company may use certain measures that are
not calculated and presented in accordance with U.S. generally accepted
accounting principles (“GAAP”). These measures include OIBDA, Adjusted OIBDA,
Adjusted OIBDA less capital expenditures, Adjusted net income attributable to
TWC shareholders, Adjusted Diluted EPS and Free Cash Flow, which the Company
defines as follows:

  *OIBDA (Operating Income before Depreciation and Amortization)  means
    Operating Income before depreciation of tangible assets and amortization
    of intangible assets.
  *Adjusted OIBDA means OIBDA excluding the impact, if any, of noncash
    impairments of goodwill, intangible and fixed assets; gains and losses on
    asset sales; merger-related and restructuring costs; and costs associated
    with certain equity awards granted to employees to offset value lost as a
    result of the Company’s separation from Time Warner (the “Separation”).
  *Adjusted OIBDA less capital expenditures means Adjusted OIBDA minus
    capital expenditures.
  *Adjusted net income attributable to TWC shareholders means net income
    attributable to TWC shareholders (as defined under GAAP) excluding the
    impact, if any, of noncash impairments of goodwill, intangible and fixed
    assets and investments; gains and losses on asset sales; merger-related
    and restructuring costs; changes in the Company’s equity award
    reimbursement obligation to Time Warner; certain changes to income tax
    provision; and costs associated with certain equity awards granted to
    employees to offset value lost as a result of the Separation; as well as
    the impact of taxes and noncontrolling interests on the above items.
    Similarly, Adjusted Diluted EPS means net income per diluted common share
    attributable to TWC common shareholders excluding the above items.
  *Free Cash Flow means cash provided by operating activities (as defined
    under GAAP) excluding the impact, if any, of cash provided or used by
    discontinued operations, plus (i) any income taxes paid on investment
    sales and (ii) any excess tax benefit from equity-based compensation, less
    (i) capital expenditures, (ii) cash paid for other intangible assets
    (excluding those associated with business combinations), (iii) partnership
    distributions to third parties and (iv) principal payments on capital
    leases.

Management uses OIBDA and Adjusted OIBDA, among other measures, in evaluating
the performance of the Company’s business because they eliminate the effects
of (i) considerable amounts of noncash depreciation and amortization and (ii)
items not within the control of the Company’s operations managers (such as net
income attributable to noncontrolling interests, income tax provision, other
income (expense), net, and interest expense, net). Adjusted OIBDA further
eliminates the effects of certain noncash items identified in the definition
of Adjusted OIBDA above. Adjusted OIBDA less capital expenditures also allows
management to evaluate performance including the effect of capital spending
decisions. Adjusted OIBDA and Adjusted OIBDA less capital expenditures are
also significant performance measures used in the Company’s annual incentive
compensation programs. Adjusted net income attributable to TWC shareholders
and Adjusted Diluted EPS are considered important indicators of the
operational strength of the Company as these measures eliminate amounts that
do not reflect the fundamental performance of the Company. The Company
utilizes Adjusted Diluted EPS, among other measures, to evaluate its
performance both on an absolute basis and relative to its peers and the
broader market. Management believes that Free Cash Flow is an important
indicator of the Company’s ability to generate cash, reduce net debt, pay
dividends, repurchase common stock and make strategic investments, after the
payment of cash taxes, interest and other cash items. In addition, all of
these measures are commonly used by analysts, investors and others in
evaluating the Company’s performance and liquidity.

These measures have inherent limitations. For example, OIBDA and Adjusted
OIBDA do not reflect capital expenditures or the periodic costs of certain
capitalized assets used in generating revenues. To compensate for such
limitations, management evaluates performance through Adjusted OIBDA less
capital expenditures and Free Cash Flow, which reflect capital expenditure
decisions, and net income attributable to TWC shareholders, which reflects the
periodic costs of capitalized assets. Adjusted OIBDA and Adjusted OIBDA less
capital expenditures do not reflect any of the items noted as exclusions in
the definition of Adjusted OIBDA above. To compensate for these limitations,
management evaluates performance through OIBDA and net income attributable to
TWC shareholders, which do reflect such items. OIBDA, Adjusted OIBDA and
Adjusted OIBDA less capital expenditures also fail to reflect the significant
costs borne by the Company for income taxes and debt servicing costs, the
share of OIBDA, Adjusted OIBDA and Adjusted OIBDA less capital expenditures
attributable to noncontrolling interests, the results of the Company’s equity
investments and other non-operational income or expense. Additionally,
Adjusted net income attributable to TWC shareholders and Adjusted Diluted EPS
do not reflect certain charges that affect the operating results of the
Company and they involve judgment as to whether items affect fundamental
operating performance. Management compensates for these limitations by using
other analytics such as a review of net income attributable to TWC
shareholders. Free Cash Flow, a liquidity measure, does not reflect payments
made in connection with investments and acquisitions, which reduce liquidity.
To compensate for this limitation, management evaluates such investments and
acquisitions through other measures such as return on investment analyses.

These non-GAAP measures should be considered in addition to, not as
substitutes for, the Company’s Operating Income, net income attributable to
TWC shareholders and various cash flow measures (e.g., cash provided by
operating activities), as well as other measures of financial performance and
liquidity reported in accordance with GAAP, and may not be comparable to
similarly titled measures used by other companies.

Contact:

Time Warner Cable Inc.
Corporate Communications
Alex Dudley, 212-364-8229
or
Justin Venech, 212-364-8242
or
Investor Relations
Tom Robey, 212-364-8218
or
Laraine Mancini, 212-364-8202
 
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