Time Warner Cable Reports 2012 Fourth-Quarter and Full-Year Results
Time Warner Cable Reports 2012 Fourth-Quarter and Full-Year Results
Business Wire
NEW YORK -- January 31, 2013
Time Warner Cable Inc. (NYSE: TWC) today reported financial results for its
fourth quarter and full year ended December 31, 2012.
Time Warner Cable Chief Executive Officer Glenn Britt said: “We delivered
revenue growth of almost 9% in 2012 – powered by our acquisition and
successful integration of Insight Communications, continued success in
residential high-speed data and business services, and a best-ever year in
advertising. In the year ahead, we plan to focus on operational excellence as
we invest to capture long-term opportunities and drive profitable growth.”
FINANCIAL RESULTS
Revenue for the fourth quarter of 2012 increased 9.9% from the fourth quarter
of 2011 to $5.5 billion. Residential services revenue increased 6.8%
year-over-year to $4.6 billion, business services revenue grew 25.9% to $515
million, advertising revenue increased 29.3% to $313 million and other revenue
grew 37.9% to $80 million.
Full-year 2012 revenue increased 8.7% year-over-year to $21.4 billion.
Residential services revenue grew 6.3% year-over-year to $18.2 billion,
business services revenue increased 29.4% to $1.9 billion, advertising revenue
increased 19.7% to $1.1 billion and other revenue increased 10.3% to $257
million.
(in
millions; 4th Quarter Full Year
unaudited)
Change Change
2012 2011 $ % 2012 2011 $ %
Residential
services
revenue:
Video $ 2,687 $ 2,628 $ 59 2.2 % $ 10,917 $ 10,589 $ 328 3.1 %
High-speed 1,346 1,148 198 17.2 % 5,090 4,476 614 13.7 %
data
Voice 527 495 32 6.5 % 2,104 1,979 125 6.3 %
Other 17 13 4 30.8 % 64 49 15 30.6 %
Total
residential 4,577 4,284 293 6.8 % 18,175 17,093 1,082 6.3 %
services
revenue
Business
services
revenue:
Video 83 74 9 12.2 % 323 286 37 12.9 %
High-speed 245 196 49 25.0 % 912 727 185 25.4 %
data
Voice 87 57 30 52.6 % 306 197 109 55.3 %
Wholesale 52 44 8 18.2 % 184 154 30 19.5 %
transport
Other 48 38 10 26.3 % 176 105 71 67.6 %
Total
business 515 409 106 25.9 % 1,901 1,469 432 29.4 %
services
revenue
Advertising 313 242 71 29.3 % 1,053 880 173 19.7 %
revenue^(a)
Other 80 58 22 37.9 % 257 233 24 10.3 %
revenue
Total $ 5,485 $ 4,993 $ 492 9.9 % $ 21,386 $ 19,675 $ 1,711 8.7 %
revenue
Advertising revenue includes revenue from political advertising of $60
million and $5 million for the fourth quarter of 2012 and 2011,
^(a) respectively, and
$114 million and $15 million for the full year of 2012 and 2011,
respectively.
Revenue for the fourth quarter and full year of 2012 benefited from acquisitions, as
detailed below.
(in
millions; 4th Quarter 2012
unaudited)
Historical Organic Acquisitions Total
TWC^(a) % Insight NewWave^(c) Total TWC
Change^(b)
Residential
services
revenue:
Video $ 2,546 (3.1 %) $ 137 $ 4 $ 141 $ 2,687
High-speed 1,279 11.4 % 66 1 67 1,346
data
Voice 488 (1.4 %) 38 1 39 527
Other 16 23.1 % 1 — 1 17
Total
residential 4,329 1.1 % 242 6 248 4,577
services
revenue
Business
services 498 21.8 % 17 — 17 515
revenue
Advertising 299 23.6 % 14 — 14 313
revenue
Other 77 32.8 % 2 1 3 80
revenue
Total $ 5,203 4.2 % $ 275 $ 7 $ 282 $ 5,485
revenue
Historical TWC amounts include the results of the cable systems acquired
from NewWave Communications (acquired on November 1, 2011) from
(a) November 1 through December 31, 2012 and exclude the results of (i)
Insight Communications Company, Inc. and (ii) the NewWave cable systems
from
October 1 through October 31, 2012.
Organic % Change represents the change between the Historical TWC
(b) amounts for the fourth quarter of 2012 and TWC’s results for the fourth
quarter
of 2011 included in the table above.
(c) NewWave amounts represent the NewWave cable systems’ results for the
period from October 1 through October 31, 2012.
(in
millions; Full Year 2012
unaudited)
Historical Organic Acquisitions Total
TWC^(a) % Insight^(c) NewWave^(d) NaviSite^(e) Total TWC
Change^(b)
Residential
services
revenue:
Video $ 10,418 (1.6 %) $ 462 $ 37 $ — $ 499 $ 10,917
High-speed 4,856 8.5 % 220 14 — 234 5,090
data
Voice 1,968 (0.6 %) 127 9 — 136 2,104
Other 61 24.5 % 3 — — 3 64
Total
residential 17,303 1.2 % 812 60 — 872 18,175
services
revenue
Business
services 1,792 22.0 % 55 5 49 109 1,901
revenue
Advertising 1,013 15.1 % 40 — — 40 1,053
revenue
Other 252 8.2 % 4 1 — 5 257
revenue
Total $ 20,360 3.5 % $ 911 $ 66 $ 49 $ 1,026 $ 21,386
revenue
Historical TWC amounts include the results of (i) NaviSite, Inc.
(acquired on April 21, 2011) from April 21 through December 31, 2012 and
(ii) the
(a) NewWave cable systems from November 1 through December 31, 2012 and
exclude the results of (i) NaviSite from January 1 through April 20,
2012,
(ii) Insight and (iii) the NewWave cable systems from January 1 through
October 31, 2012.
Organic % Change represents the change between the Historical TWC
(b) amounts for the year ended December 31, 2012 and TWC’s results for the
year
ended December 31, 2011 included in the table on page 2.
(c) Insight amounts represent the financial results of Insight from the date
of acquisition (February 29, 2012) through December 31, 2012.
(d) NewWave amounts represent the NewWave cable systems’ results for the
period from January 1 through October 31, 2012.
(e) NaviSite amounts represent NaviSite’s results for the period from
January 1 through April 20, 2012.
Excluding the impact from acquisitions:
Residential services revenue
Residential services revenue growth for the fourth quarter and full year of
2012 was primarily driven by an increase in high-speed data revenue, partially
offset by declines in video and voice revenue.
* The growth in residential high-speed data revenue was the result of growth
in high-speed data subscribers and an increase in average revenue per
subscriber, primarily due to price increases (including equipment rental
charges) and a greater percentage of subscribers purchasing higher-priced
tiers of service.
* Residential video revenue decreased driven by declines in video
subscribers and transactional video-on-demand and premium network revenue,
partially offset by price increases, a greater percentage of subscribers
purchasing higher-priced tiers of service and increased revenue from
equipment rentals.
* Residential voice revenue decreased slightly due to a decrease in average
revenue per subscriber, partially offset by growth in voice subscribers.
Business services revenue
Business services revenue growth for the fourth quarter and full year of 2012
was primarily due to increases in high-speed data and voice subscribers and
growth in Metro Ethernet revenue.
Advertising revenue
Advertising revenue increased for the fourth quarter and full year of 2012
primarily as a result of increases in political advertising, revenue from
advertising inventory sold on behalf of other video distributors and the
advertising sold on the Company’s two Los Angeles regional sports networks,
which were launched on October 1, 2012 and carry Los Angeles Lakers’
basketball games and other sports programming.
Other revenue
Other revenue increased for the fourth quarter and full year of 2012 primarily
as a result of fees from distributors of the Los Angeles regional sports
networks.
Fourth-quarter 2012 Adjusted Operating Income before Depreciation and
Amortization (“Adjusted OIBDA”) increased 5.6% from the fourth quarter of 2011
to $2.0 billion driven by revenue growth, partially offset by a 12.5% increase
in operating expenses. In particular, employee costs were up 11.4% to $1.2
billion, video programming expenses grew 7.0% to $1.2 billion, marketing costs
increased 18.3% to $181 million, voice costs were up 10.6% to $156 million and
other operating costs increased 27.0% to $649 million.
Full-year 2012 Adjusted OIBDA increased 8.3% from 2011 to $7.8 billion. The
year-over-year increase in Adjusted OIBDA was driven by revenue growth,
partially offset by an 8.9% increase in operating expenses. For the full year,
employee costs were up 10.7% to $4.5 billion, video programming expenses grew
6.4% to $4.6 billion, voice costs were up 3.2% to $614 million and other
operating costs increased 15.6% to $2.3 billion.
In both the fourth-quarter and full-year 2012:
* Employee costs were up primarily 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 and $60 million
for the fourth quarter and full year of 2012, respectively, primarily due
to the decline in interest rates to historically low levels.
* Video programming expenses grew 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 5.1% year-over-year to
$31.28 for the fourth quarter of 2012 and 5.2% year-over-year to $31.12
for the full year of 2012, primarily driven by contractual rate increases
and the carriage of new networks, partially offset by a decline in
transactional video-on-demand costs. For the fourth quarter and full year
of 2012, video programming costs were reduced by approximately $20 million
and $40 million, respectively, and, for the full year of 2011, video
programming costs were reduced by approximately $25 million due to changes
in cost estimates for programming services carried during contract
negotiations, changes in programming audit reserves and certain contract
settlements.
* Voice costs were up 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.
* Other operating costs increased as a result of costs associated with
Insight and the Los Angeles regional sports networks, as well as increases
in a number of categories.
Fourth-quarter 2012 Operating Income increased 13.6% from the fourth quarter
of 2011 to $1.2 billion and full-year 2012 Operating Income increased 9.2%
from 2011 to $4.4 billion, both driven by higher Adjusted OIBDA and the
fourth-quarter 2011 wireless-related asset impairments, 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. Operating Income growth was
also impacted by merger-related and restructuring costs, which, on a
year-over-year basis, decreased $17 million for the fourth quarter of 2012 and
increased $45 million for the full year of 2012.
(in millions; 4th Quarter Full Year
unaudited)
Change Change
2012 2011 $ % 2012 2011 $ %
Adjusted $ 1,994 $ 1,889 $ 105 5.6 % $ 7,824 $ 7,226 $ 598 8.3 %
OIBDA^(a)
Adjusted OIBDA 36.4 % 37.8 % 36.6 % 36.7 %
margin^(b)
Merger-related
and (17 ) (34 ) 17 (50.0 %) (115 ) (70 ) (45 ) 64.3 %
restructuring
costs
Asset — (60 ) 60 (100.0 %) — (60 ) 60 (100.0 %)
impairments^(c)
OIBDA^(a) 1,977 1,795 182 10.1 % 7,709 7,096 613 8.6 %
Depreciation (777 ) (756 ) (21 ) 2.8 % (3,154 ) (2,994 ) (160 ) 5.3 %
Amortization (31 ) (10 ) (21 ) 210.0 % (110 ) (33 ) (77 ) 233.3 %
Operating $ 1,169 $ 1,029 $ 140 13.6 % $ 4,445 $ 4,069 $ 376 9.2 %
Income
(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 revenue.
(c) Refer to Note 1 to the accompanying consolidated financial statements
for additional information.
Adjusted OIBDA less Capital Expenditures for the full year of 2012 totaled
$4.7 billion, a 10.3% increase over the full year of 2011, primarily due to
higher Adjusted OIBDA, partially offset by higher capital expenditures.
Capital Expenditures, which include Insight-related capital spending of
approximately $100 million, were $3.1 billion in 2012.
(in millions; 4th Quarter Full Year
unaudited)
Change Change
2012 2011 $ % 2012 2011 $ %
Adjusted $ 1,994 $ 1,889 $ 105 5.6 % $ 7,824 $ 7,226 $ 598 8.3 %
OIBDA^(a)
Capital (904 ) (942 ) 38 (4.0 %) (3,095 ) (2,937 ) (158 ) 5.4 %
expenditures
Adjusted OIBDA
less capital $ 1,090 $ 947 $ 143 15.1 % $ 4,729 $ 4,289 $ 440 10.3 %
expenditures^(a)
Refer to Note 2 to the accompanying consolidated financial statements
(a) for a definition of Adjusted OIBDA and Adjusted OIBDA less capital
expenditures.
Fourth-quarter 2012 Net Income Attributable to TWC Shareholders was $513
million, or $1.70 per basic common share and $1.68 per diluted common share,
compared to $564 million, or $1.76 per basic common share and $1.75 per
diluted common share, in the prior year quarter. Full-year 2012 net income
attributable to TWC shareholders was $2.2 billion, or $6.97 per basic common
share and $6.90 per diluted common share, compared to $1.7 billion, or $5.02
per basic common share and $4.97 per diluted common share, in the prior year.
Fourth-quarter Adjusted Net Income Attributable to TWC Shareholders and
Adjusted Diluted EPS, which exclude certain tax matters, a 2011 asset
impairment and other items affecting the comparability of TWC’s results for
2012 and 2011 (detailed in Note 1 to the accompanying consolidated financial
statements), were $479 million and $1.57, respectively, for the fourth quarter
of 2012 compared to $447 million and $1.38, respectively, for the fourth
quarter of 2011. These increases were primarily due to higher Operating
Income, partially offset by higher income tax provision.
Full-year Adjusted net income attributable to TWC shareholders and Adjusted
Diluted EPS, which exclude the 2012 investment-related gains (SpectrumCo, LLC
and Clearwire Corporation), certain tax matters and other items detailed in
Note 1, were $1.8 billion and $5.75, respectively, for 2012 compared to $1.6
billion and $4.69, respectively, for 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 LLC as the Company’s investment was
reduced to $0 during the third quarter of 2011.
Additionally, Adjusted Diluted EPS for the fourth quarter and full year 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 4th Quarter Full Year
share data; unaudited)
Change Change
2012 2011 $ % 2012 2011 $ %
Net income attributable
to TWC
shareholders $ 513 $ 564 $ (51 ) (9.0 %) $ 2,155 $ 1,665 $ 490 29.4 %
Adjusted net income
attributable to TWC
shareholders^(a) $ 479 $ 447 $ 32 7.2 % $ 1,797 $ 1,573 $ 224 14.2 %
Net income per common
share attributable
to TWC common
shareholders:
Basic $ 1.70 $ 1.76 $ (0.06 ) (3.4 %) $ 6.97 $ 5.02 $ 1.95 38.8 %
Diluted $ 1.68 $ 1.75 $ (0.07 ) (4.0 %) $ 6.90 $ 4.97 $ 1.93 38.8 %
Adjusted Diluted EPS^(a) $ 1.57 $ 1.38 $ 0.19 13.8 % $ 5.75 $ 4.69 $ 1.06 22.6 %
Refer to Note 2 to the accompanying consolidated financial statements
(a) for a definition of Adjusted net income attributable to TWC shareholders
and
Adjusted Diluted EPS.
Free Cash Flow for the full-year 2012 decreased 7.1%, or $194 million, to $2.6
billion due mainly to lower cash provided by operating activities and an
increase in capital expenditures. Cash Provided by Operating Activities for
the full-year 2012 was $5.5 billion, a 2.9% decrease from $5.7 billion in
2011. This decrease was driven by an increase in income tax payments, a
significant income tax refund (received in the first quarter of 2011) and
higher net interest payments, partially offset by higher Adjusted OIBDA and
lower pension plan contributions.
(in millions; 4th Quarter Full Year
unaudited)
Change Change
2012 2011 $ % 2012 2011 $ %
Adjusted $ 1,994 $ 1,889 $ 105 5.6 % $ 7,824 $ 7,226 $ 598 8.3 %
OIBDA^(a)
Net interest (300 ) (306 ) 6 (2.0 %) (1,602 ) (1,434 ) (168 ) 11.7 %
payments
Net income
tax refunds (253 ) (5 ) (248 ) NM (544 ) 162 (706 ) (435.8 %)
(payments)
Pension plan (137 ) (326 ) 189 (58.0 %) (289 ) (405 ) 116 (28.6 %)
contributions
All other,
net,
including
working
capital
changes 106 92 14 15.2 % 136 139 (3 ) (2.2 %)
Cash provided
by operating 1,410 1,344 66 4.9 % 5,525 5,688 (163 ) (2.9 %)
activities
Add:
Income taxes
paid on 84 — 84 NM 84 — 84 NM
investment
sales
Excess tax
benefit from
exercise of
stock options 8 2 6 300.0 % 81 48 33 68.8 %
Less:
Capital (904 ) (942 ) 38 (4.0 %) (3,095 ) (2,937 ) (158 ) 5.4 %
expenditures
Cash paid for
other (10 ) (11 ) 1 (9.1 %) (37 ) (47 ) 10 (21.3 %)
intangible
assets
Other (1 ) (2 ) 1 (50.0 %) (6 ) (6 ) — —
Free Cash 587 391 196 50.1 % 2,552 2,746 (194 ) (7.1 %)
Flow^(a)
Economic
Stimulus Act 26 (83 ) 109 (131.3 %) 102 (619 ) 721 (116.5 %)
impacts^(b)
Free Cash
Flow
excluding
Economic
Stimulus Act $ 613 $ 308 $ 305 99.0 % $ 2,654 $ 2,127 $ 527 24.8 %
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.
Additional information on the Economic Stimulus Acts is available in the
(b) 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 December 31, 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) 12/31/2012 12/31/2011
Long-term debt $ 25,171 $ 24,320
Debt due within one year 1,518 2,122
Total debt 26,689 26,442
Cash and equivalents (3,304) (5,177)
Short-term investments in U.S. Treasury (150) —
securities
Net debt^(a) 23,235 21,265
Mandatorily redeemable preferred equity 300 300
Net debt and mandatorily redeemable $ 23,535 $ 21,565
preferred equity
(a) Net debt is defined as total debt less cash and equivalents and
short-term investments in U.S. Treasury securities.
RETURN OF CAPITAL
Time Warner Cable returned $742 million and $2.6 billion to shareholders
during the fourth quarter and full year of 2012, respectively. Share
repurchases totaled $571 million, or 6.0 million shares of common stock,
during the fourth quarter of 2012 and totaled $1.9 billion, or 22.1 million
shares of common stock, during the full year of 2012. As of December 31, 2012,
$2.2 billion remained under the Company’s share repurchase authorization. Time
Warner Cable also paid regular dividends of $171 million and $700 million
during the fourth quarter and full year of 2012, respectively.
SUBSCRIBER METRICS
(in thousands)
Net
9/30/2012 Additions 12/31/2012
(Declines)
Residential services
subscribers:
Video 12,159 (129) 12,030
High-speed data 10,860 75 10,935
Voice 4,990 34 5,024
Business services subscribers:
Video 185 3 188
High-speed data 446 14 460
Voice 212 12 224
Single play subscribers 5,936 (29) 5,907
Double play subscribers 5,070 (34) 5,036
Triple play subscribers 4,258 36 4,294
Customer relationships 15,264 (27) 15,237
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 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 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, January 31, 2013. 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)
December 31,
2012 2011
(in millions)
ASSETS
Current assets:
Cash and equivalents $ 3,304 $ 5,177
Short-term investments in U.S. Treasury 150 —
securities
Receivables, less allowances of $65 million
and $62 million
as of December 31, 2012 and 2011, 883 767
respectively
Deferred income tax assets 317 267
Other current assets 223 187
Total current assets 4,877 6,398
Investments 87 774
Property, plant and equipment, net 14,742 13,905
Intangible assets subject to amortization, 641 228
net
Intangible assets not subject to 26,011 24,272
amortization
Goodwill 2,889 2,247
Other assets 562 452
Total assets $ 49,809 $ 48,276
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 653 $ 545
Deferred revenue and subscriber-related 183 169
liabilities
Accrued programming expense 872 807
Current maturities of long-term debt 1,518 2,122
Mandatorily redeemable preferred equity 300 —
issued by a subsidiary
Other current liabilities 1,799 1,727
Total current liabilities 5,325 5,370
Long-term debt 25,171 24,320
Mandatorily redeemable preferred equity — 300
issued by a subsidiary
Deferred income tax liabilities, net 11,280 10,198
Other liabilities 750 551
TWC shareholders’ equity:
Common stock, $0.01 par value, 297.7 million
and 315.0 million shares issued and
outstanding as of December 31, 2012 and 3 3
2011, respectively
Additional paid-in capital 7,576 8,018
Retained earnings 363 68
Accumulated other comprehensive loss, net (663 ) (559 )
Total TWC shareholders’ equity 7,279 7,530
Noncontrolling interests 4 7
Total equity 7,283 7,537
Total liabilities and equity $ 49,809 $ 48,276
See accompanying notes.
TIME WARNER CABLE INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2012 2011 2012 2011
(in millions, except per share data)
Revenue $ 5,485 $ 4,993 $ 21,386 $ 19,675
Costs and expenses:
Cost of revenue^(a) 2,565 2,283 9,942 9,138
Selling, general and 926 821 3,620 3,311
administrative^(a)
Depreciation 777 756 3,154 2,994
Amortization 31 10 110 33
Merger-related and 17 34 115 70
restructuring costs
Asset impairments — 60 — 60
Total costs and 4,316 3,964 16,941 15,606
expenses
Operating Income 1,169 1,029 4,445 4,069
Interest expense, (402 ) (406 ) (1,606 ) (1,518 )
net
Other income 4 (5 ) 497 (89 )
(expense), net
Income before income 771 618 3,336 2,462
taxes
Income tax provision (257 ) (54 ) (1,177 ) (795 )
Net income 514 564 2,159 1,667
Less: Net income
attributable to (1 ) — (4 ) (2 )
noncontrolling
interests
Net income
attributable to TWC $ 513 $ 564 $ 2,155 $ 1,665
shareholders
Net income per
common share
attributable to
TWC common
shareholders:
Basic $ 1.70 $ 1.76 $ 6.97 $ 5.02
Diluted $ 1.68 $ 1.75 $ 6.90 $ 4.97
Average common
shares outstanding:
Basic 300.7 317.8 307.8 329.7
Diluted 305.6 323.1 312.4 335.3
Cash dividends $ 0.56 $ 0.48 $ 2.24 $ 1.92
declared per share
——————————
^(a) Cost of revenue and selling, general and administrative expenses exclude
depreciation.
See accompanying notes.
TIME WARNER CABLE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Year Ended
December 31,
2012 2011
(in millions)
OPERATING ACTIVITIES
Net income $ 2,159 $ 1,667
Adjustments for noncash and nonoperating
items:
Depreciation 3,154 2,994
Amortization 110 33
Asset impairments — 60
(Income) loss from equity-method (426 ) 109
investments, net of cash distributions
Pretax gain on sale of investment in (64 ) —
Clearwire
Deferred income taxes 562 638
Equity-based compensation 130 112
Excess tax benefit from equity-based (81 ) (48 )
compensation
Changes in operating assets and liabilities,
net of acquisitions and dispositions:
Receivables (63 ) (25 )
Accounts payable and other liabilities (26 ) 202
Other changes 70 (54 )
Cash provided by operating activities 5,525 5,688
INVESTING ACTIVITIES
Capital expenditures (3,095 ) (2,937 )
Acquisitions and investments, net of cash (1,308 ) (630 )
acquired and distributions received
Proceeds from SpectrumCo’s sale of spectrum 1,112 —
licenses
Proceeds from sale of investment in 64 —
Clearwire
Short-term investments in U.S. Treasury (150 ) —
securities
Other investing activities 32 37
Cash used by investing activities (3,345 ) (3,530 )
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 2,258 3,227
Repayments of long-term debt (2,100 ) —
Repayments of long-term debt assumed in (1,730 ) (44 )
acquisitions
Debt issuance costs (26 ) (25 )
Proceeds from exercise of stock options 140 114
Taxes paid in cash in lieu of shares issued (45 ) (29 )
for equity-based compensation
Excess tax benefit from equity-based 81 48
compensation
Dividends paid (700 ) (642 )
Repurchases of common stock (1,850 ) (2,657 )
Acquisition of noncontrolling interest (32 ) —
Other financing activities (49 ) (20 )
Cash used by financing activities (4,053 ) (28 )
Increase (decrease) in cash and equivalents (1,873 ) 2,130
Cash and equivalents at beginning of year 5,177 3,047
Cash and equivalents at end of year $ 3,304 $ 5,177
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 months and year ended December
31, 2012 and 2011:
(in millions, except per share data)
Operating Income TWC Net Diluted
OIBDA^(a) D&A^(a) Income Other^(a) Tax
Provision Income^(a) EPS^(a)
4th Quarter
2012:
As reported $ 1,977 $ (808) $ 1,169 $ (399) $ (257) $ 513 $ 1.68
Year-over-year
change, as
reported:
$ $ 182 $ (42) $ 140 $ 12 $ (203) $ (51) $ (0.07)
% 10.1% 5.5% 13.6% (2.9%) 375.9% (9.0%) (4.0%)
Items affecting
comparability:
Merger-related
and 17 — 17 — (6) 11 0.03
restructuring
costs
Loss on equity
award
reimbursement — — — 4 (2) 2 0.01
obligation to
Time Warner^(b)
Impact of
certain state — — — — (47) (47) (0.15)
tax matters^(c)
As adjusted $ 1,994 $ (808) $ 1,186 $ (395) $ (312) $ 479 $ 1.57
Year-over-year
change, as
adjusted:
$ $ 105 $ (42) $ 63 $ 8 $ (39) $ 32 $ 0.19
% 5.6% 5.5% 5.6% (2.0%) 14.3% 7.2% 13.8%
4th Quarter
2011:
As reported $ 1,795 $ (766) $ 1,029 $ (411) $ (54) $ 564 $ 1.75
Items affecting
comparability:
Merger-related
and 34 — 34 — (14) 20 0.06
restructuring
costs
Asset 60 — 60 — (24) 36 0.11
impairments^(d)
Loss on equity
award
reimbursement — — — 8 (3) 5 0.01
obligation to
Time Warner^(b)
Change in net
deferred income
tax liability
effective
tax — — — — (178) (178) (0.55)
rate^(e)
As adjusted $ 1,889 $ (766) $ 1,123 $ (403) $ (273) $ 447 $ 1.38
——————————
OIBDA represents Operating Income before Depreciation and Amortization.
D&A represents depreciation and amortization. Other consists of interest
(a) 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.
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 of such awards.
(b) 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.
(c) Amount primarily represents a benefit recorded as a result of a
California state tax law change.
In early 2012, TWC ceased making its existing wireless service available
to new wireless customers. As a result, during the fourth quarter of
(d) 2011, the
Company impaired $60 million of assets related to the provision of
wireless service that would no longer be utilized.
During the fourth quarter of 2011, TWC completed its income tax returns
for the 2010 taxable year, its first full-year income tax returns
subsequent
to TWC’s separation from Time Warner on March 12, 2009 (the
“Separation”), reflecting the income tax positions and state income tax
(e) apportionments of TWC as a standalone taxpayer. Based on these returns,
the Company concluded that an approximate 65 basis point change in the
estimate of the effective tax rate applied to calculate its net deferred
income tax liability was required. As a result, TWC recorded a noncash
income
tax benefit of $178 million.
(in millions, except per share data)
Operating Income Tax TWC Net Diluted
OIBDA^(a) D&A^(a) Income Other^(a) Provision Income^(a)
EPS^(a)
Full Year 2012:
As reported $ 7,709 $ (3,264 ) $ 4,445 $ (1,113 ) $ (1,177 ) $ 2,155 $ 6.90
Year-over-year
change, as
reported:
$ $ 613 $ (237 ) $ 376 $ 496 $ (382 ) $ 490 $ 1.93
% 8.6 % 7.8 % 9.2 % (30.8 %) 48.1 % 29.4 % 38.8 %
Items affecting
comparability:
Merger-related
and 115 — 115 — (46 ) 69 0.22
restructuring
costs
Asset — — — 12 (5 ) 7 0.02
impairments^(b)
Gain on
SpectrumCo’s
sale of — — — (430 ) 169 (261 ) (0.84 )
spectrum
licenses^(c)
Gain on sale of
investment in — — — (64 ) (19 ) (83 ) (0.27 )
Clearwire^(d)
Loss on equity
award
reimbursement — — — 9 (4 ) 5 0.02
obligation to
Time Warner^(e)
Change in net
deferred income
tax liability — — — — (63 ) (63 ) (0.20 )
effective tax
rate^(f)
Impact of
certain state — — — — (47 ) (47 ) (0.15 )
tax matters^(g)
Impact of
partnership — — — — 15 15 0.05
basis
difference^(h)
As adjusted $ 7,824 $ (3,264 ) $ 4,560 $ (1,586 ) $ (1,177 ) $ 1,797 $ 5.75
Year-over-year
change, as
adjusted:
$ $ 598 $ (237 ) $ 361 $ 18 $ (155 ) $ 224 $ 1.06
% 8.3 % 7.8 % 8.6 % (1.1 %) 15.2 % 14.2 % 22.6 %
Full Year 2011:
As reported $ 7,096 $ (3,027 ) $ 4,069 $ (1,609 ) $ (795 ) $ 1,665 $ 4.97
Items affecting
comparability:
Merger-related
and 70 — 70 — (28 ) 42 0.12
restructuring
costs
Asset 60 — 60 — (24 ) 36 0.11
impairments^(i)
Loss on equity
award
reimbursement — — — 5 (2 ) 3 0.01
obligation to
Time Warner^(e)
Change in net
deferred income
tax liability — — — — (178 ) (178 ) (0.53 )
effective tax
rate^(j)
Impact of
domestic
production — — — — (9 ) (9 ) (0.03 )
activities
deduction
Impact of
expired Time
Warner stock — — — — 14 14 0.04
options,
net^(k)
As adjusted $ 7,226 $ (3,027 ) $ 4,199 $ (1,604 ) $ (1,022 ) $ 1,573 $ 4.69
OIBDA represents Operating Income before Depreciation and Amortization.
D&A represents depreciation and amortization. Other consists of interest
(a) 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.
On August 24, 2012, SpectrumCo, LLC (“SpectrumCo”) of which TWC owns
(c) 31.2%, sold all of its advanced wireless spectrum licenses to Cellco
Partnership (doing business as Verizon Wireless).
On September 27, 2012, the Company sold all of its investment in
Clearwire Corporation (“Clearwire”). Income tax provision amount
(d) 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.
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 of such awards. Amounts represent the change
(e) 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.
Amount represents a benefit related to a change in the tax rate applied
(f) to calculate the Company’s net deferred income tax liability as a result
of an
internal reorganization effective on September 30, 2012.
(g) Amount primarily represents a benefit recorded as a result of a
California state tax law change.
(h) Amount represents a charge related to the recording of a deferred income
tax liability associated with a partnership basis difference.
In early 2012, TWC ceased making its existing wireless service available
to new wireless customers. As a result, during the fourth quarter of
(i) 2011, the
Company impaired $60 million of assets related to the provision of
wireless service that would no longer be utilized.
During the fourth quarter of 2011, TWC completed its income tax returns
for the 2010 taxable year, its first full-year income tax returns
subsequent
to the Separation, reflecting the income tax positions and state income
(j) tax apportionments of TWC as a standalone taxpayer. Based on these
returns, the Company concluded that an approximate 65 basis point change
in the estimate of the effective tax rate applied to calculate its net
deferred income tax liability was required. As a result, TWC recorded a
noncash income tax benefit of $178 million.
Amount represents the impact of the reversal of deferred income tax
(k) 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 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 revenue. 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
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement
Rate this Page