[October 30, 2014] |
|
Time Warner Cable Reports 2014 Third-Quarter Results
NEW YORK --(Business Wire)--
Time Warner Cable Inc. (NYSE:TWC) today reported financial results for
its third quarter ended September 30, 2014.
Time Warner Cable Chairman and CEO Rob Marcus said: "We're executing
well against our plan, with solid financial performance and strong
subscriber momentum. We continue to expect the Comcast merger to close
early in 2015."
SELECTED CONSOLIDATED FINANCIAL RESULTS
|
|
|
|
|
|
|
|
|
(in millions, except per share data;
|
|
|
|
3rd Quarter
|
|
|
Year-to-Date 9/30
|
unaudited)
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
|
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
Revenue
|
|
|
|
$
|
5,714
|
|
$
|
5,518
|
|
|
$
|
196
|
|
|
3.6
|
%
|
|
|
$
|
17,022
|
|
$
|
16,543
|
|
|
$
|
479
|
|
|
2.9
|
%
|
Adjusted OIBDA(a)
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|
|
|
$
|
2,054
|
|
$
|
2,005
|
|
|
$
|
49
|
|
|
2.4
|
%
|
|
|
$
|
6,088
|
|
$
|
5,954
|
|
|
$
|
134
|
|
|
2.3
|
%
|
Operating Income(b)
|
|
|
|
$
|
1,151
|
|
$
|
1,160
|
|
|
$
|
(9
|
)
|
|
(0.8
|
%)
|
|
|
$
|
3,406
|
|
$
|
3,407
|
|
|
$
|
(1
|
)
|
|
-
|
|
Diluted EPS(c)
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|
|
|
$
|
1.76
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|
$
|
1.84
|
|
|
$
|
(0.08
|
)
|
|
(4.3
|
%)
|
|
|
$
|
5.22
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|
$
|
4.81
|
|
|
$
|
0.41
|
|
|
8.5
|
%
|
Adjusted Diluted EPS(a)
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|
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|
$
|
1.86
|
|
$
|
1.69
|
|
|
$
|
0.17
|
|
|
10.1
|
%
|
|
|
$
|
5.53
|
|
$
|
4.80
|
|
|
$
|
0.73
|
|
|
15.2
|
%
|
Cash provided by operating activities(b)
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|
|
|
$
|
1,448
|
|
$
|
1,209
|
|
|
$
|
239
|
|
|
19.8
|
%
|
|
|
$
|
4,540
|
|
$
|
4,154
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|
|
$
|
386
|
|
|
9.3
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%
|
Capital expenditures
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$
|
1,105
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|
$
|
774
|
|
|
$
|
331
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|
|
42.8
|
%
|
|
|
$
|
3,179
|
|
$
|
2,371
|
|
|
$
|
808
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|
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34.1
|
%
|
Free Cash Flow(a)(b)
|
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|
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$
|
368
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|
$
|
440
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|
|
$
|
(72
|
)
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|
(16.4
|
%)
|
|
|
$
|
1,456
|
|
$
|
1,833
|
|
|
$
|
(377
|
)
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|
(20.6
|
%)
|
Free Cash Flow excluding Economic
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
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Stimulus Act impacts(d)
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$
|
465
|
|
$
|
459
|
|
|
$
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6
|
|
|
1.3
|
%
|
|
|
$
|
1,748
|
|
$
|
1,891
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|
|
$
|
(143
|
)
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|
(7.6
|
%)
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(a)
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|
Refer to Note 4 to the accompanying consolidated financial
statements for definitions of Adjusted OIBDA, Adjusted Diluted EPS
and Free Cash Flow and below for reconciliations.
|
(b)
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|
Operating Income is reduced by merger-related and restructuring
costs of $46 million and $23 million for the third quarters of 2014
and 2013, respectively, and $187 million and $81 million for the
nine months ended September 30, 2014 and 2013, respectively. Cash
provided by operating activities and Free Cash Flow are reduced by
merger-related and restructuring payments of $22 million and $27
million for the third quarters of 2014 and 2013, respectively, and
$109 million and $91 million for the nine months ended September 30,
2014 and 2013, respectively.
|
(c)
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Diluted EPS represents net income per diluted common share
attributable to TWC common shareholders.
|
(d)
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Additional information on the Economic Stimulus Acts is available
in the Trending Schedules posted on the Company's website at www.twc.com/investors.
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|
|
HIGHLIGHTS
Financial Highlights
-
Third-quarter 2014 revenue grew 3.6% year over year with Business
Services revenue up 21.9% and residential high-speed data revenue up
10.9%.
-
Adjusted OIBDA was $2.1 billion - up 2.4% year over year and flat with
Q2 - the best third-quarter sequential performance in eight years.
Operating Income of $1.2 billion decreased slightly year over year due
to higher depreciation and merger-related costs.
-
Business Services operating leverage increased significantly as
Adjusted OIBDA growth of 28.5% outpaced revenue growth by 660 basis
points.
-
Adjusted Diluted EPS increased 10.1% to $1.86. Diluted EPS decreased
4.3% to $1.76.
-
Third-quarter 2014 average monthly revenue per residential customer
relationship (ARPU) grew 1.4% to $106.58.
Operational Highlights
-
Total customer relationship performance was the best for any third
quarter in six years.
-
Total high-speed data net additions of 108,000 marked the best
third-quarter performance in five years.
-
The Company made significant progress in the roll out of "TWC Maxx."
The "all digital" conversion is now complete in New York City and Los
Angeles, and Internet speeds of up to 300 Mbps are now available to
roughly seven million homes in New York City, Los Angeles and Austin,
Texas.
-
TWC continued its aggressive investments in CPE to support TWC Maxx
and improve the customer experience. Year to date, the Company
connected more than five million new set-top boxes, digital-to-analog
converters and advanced modems to its network.
-
Investments in network reliability and customer care contributed to a
more than 12% year-over-year reduction in trouble calls per customer
relationship - half a million fewer truck rolls year to date.
-
On-time performance within TWC's company-wide one-hour service windows
reached 96% in the third quarter.
-
Business Services added more than 16,000 commercial buildings to its
network in the third quarter, expanding its serviceable market
opportunity by over $250 million per year.
CHANGES IN BASIS OF PRESENTATION
Effective in the first quarter of 2014, the Company determined it has
three reportable segments: Residential Services, Business Services and
Other Operations. Additionally, during the first quarter of 2014, the
Company revised its categorization of operating costs and expenses to be
consistent with how such costs and expenses are presented to management
and to provide a more meaningful presentation. The Company has recast
its financial information and disclosures for the prior periods to
include (i) disclosure of segment results, which are discussed further
below in "Detailed Segment Results" and Note 3 to the accompanying
consolidated financial statements, and (ii) the revised categorization
of operating costs and expenses, which had no impact on total operating
costs and expenses, Operating Income or net income attributable to TWC
shareholders for any period presented.
CONSOLIDATED REVENUE AND PROFITABILITY RESULTS
Revenue for the third quarter of 2014 increased 3.6% year over
year as a result of revenue growth at all segments.
Adjusted Operating Income before Depreciation and Amortization
("Adjusted OIBDA") for the third quarter of 2014 increased
2.4% driven by revenue growth, partially offset by a 4.2% year-over-year
increase in operating expenses.
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(in millions; unaudited)
|
|
|
|
3rd Quarter
|
|
|
Year-to-Date 9/30
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and content
|
|
|
|
$
|
1,326
|
|
$
|
1,210
|
|
|
$
|
116
|
|
|
9.6
|
%
|
|
|
$
|
3,976
|
|
$
|
3,719
|
|
|
$
|
257
|
|
|
6.9
|
%
|
Sales and marketing
|
|
|
|
|
556
|
|
|
528
|
|
|
|
28
|
|
|
5.3
|
%
|
|
|
|
1,655
|
|
|
1,497
|
|
|
|
158
|
|
|
10.6
|
%
|
Technical operations
|
|
|
|
|
401
|
|
|
394
|
|
|
|
7
|
|
|
1.8
|
%
|
|
|
|
1,143
|
|
|
1,129
|
|
|
|
14
|
|
|
1.2
|
%
|
Customer care
|
|
|
|
|
210
|
|
|
191
|
|
|
|
19
|
|
|
9.9
|
%
|
|
|
|
622
|
|
|
575
|
|
|
|
47
|
|
|
8.2
|
%
|
Other operating
|
|
|
|
|
1,167
|
|
|
1,190
|
|
|
|
(23
|
)
|
|
(1.9
|
%)
|
|
|
|
3,538
|
|
|
3,669
|
|
|
|
(131
|
)
|
|
(3.6
|
%)
|
Total operating costs and expenses
|
|
|
|
$
|
3,660
|
|
$
|
3,513
|
|
|
$
|
147
|
|
|
4.2
|
%
|
|
|
$
|
10,934
|
|
$
|
10,589
|
|
|
$
|
345
|
|
|
3.3
|
%
|
|
|
The increase in operating expenses was primarily due to the following
(each of which is discussed further below under "Detailed Segment
Results"):
-
increased programming and content costs associated with SportsNet LA,
a regional sports network carrying the Los Angeles Dodgers' baseball
games and other sports programming, at the Residential Services and
Other Operations segments;
-
higher third-party programming costs at the Residential Services
segment;
-
growth in sales and marketing costs at the Business Services and
Residential Services segments;
-
higher customer care costs at the Residential Services segment; and
-
growth in costs associated with advertising inventory sold on behalf
of other video distributors at the Other Operations segment;
-
partially offset by a decline in voice costs at the Residential
Services and Business Services segments.
The growth in total operating costs and expenses was reduced by a $31
million decrease in pension expense.
Operating Income for the third quarter of 2014 decreased 0.8%
primarily due to higher depreciation and merger-related and
restructuring costs, partially offset by higher Adjusted OIBDA.
Merger-related and restructuring costs for the third quarter of 2014
included Comcast merger-related costs of $49 million, partially offset
by a $1 million reversal of DukeNet Communications merger-related costs
and a net $2 million reversal of restructuring costs primarily
associated with employee terminations and other exit costs.
DETAILED SEGMENT RESULTS
Residential Services
Residential Services revenue increased as a result of an increase in
high-speed data revenue, partially offset by decreases in video and
voice revenue.
-
Residential video revenue decreased primarily due to a year-over-year
decline in video subscribers, partially offset by an increase in
average revenue per subscriber. The increase in average revenue per
subscriber was primarily the result of price increases and higher
premium network revenue (which, for the third quarter of 2013, was
reduced by approximately $15 million of subscriber credits issued in
connection with a temporary blackout of Showtime resulting from a
dispute with CBS), partially offset by lower transactional
video-on-demand revenue.
-
The growth in residential high-speed data revenue was the result of an
increase in average revenue per subscriber, primarily due to increases
in prices and equipment rental charges and a greater percentage of
subscribers purchasing higher-priced tiers of service, as well as
growth in high-speed data subscribers.
-
Residential voice revenue decreased due to lower average revenue per
subscriber offset, in part, by growth in voice subscribers.
Selected Residential Services Financial Results
|
|
|
|
|
|
|
|
|
(in millions; unaudited)
|
|
|
|
3rd Quarter
|
|
|
Year-to-Date 9/30
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
|
|
|
$
|
2,497
|
|
$
|
2,600
|
|
|
$
|
(103
|
)
|
|
(4.0
|
%)
|
|
|
$
|
7,538
|
|
$
|
7,945
|
|
|
$
|
(407
|
)
|
|
(5.1
|
%)
|
High-speed data
|
|
|
|
|
1,620
|
|
|
1,461
|
|
|
|
159
|
|
|
10.9
|
%
|
|
|
|
4,784
|
|
|
4,291
|
|
|
|
493
|
|
|
11.5
|
%
|
Voice
|
|
|
|
|
476
|
|
|
498
|
|
|
|
(22
|
)
|
|
(4.4
|
%)
|
|
|
|
1,462
|
|
|
1,534
|
|
|
|
(72
|
)
|
|
(4.7
|
%)
|
Other
|
|
|
|
|
22
|
|
|
20
|
|
|
|
2
|
|
|
10.0
|
%
|
|
|
|
61
|
|
|
52
|
|
|
|
9
|
|
|
17.3
|
%
|
Total revenue
|
|
|
|
$
|
4,615
|
|
$
|
4,579
|
|
|
$
|
36
|
|
|
0.8
|
%
|
|
|
$
|
13,845
|
|
$
|
13,822
|
|
|
$
|
23
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA(a)
|
|
|
|
$
|
2,126
|
|
$
|
2,123
|
|
|
$
|
3
|
|
|
0.1
|
%
|
|
|
$
|
6,450
|
|
$
|
6,494
|
|
|
$
|
(44
|
)
|
|
(0.7
|
%)
|
|
(a) Refer to Note 4 to the accompanying consolidated
financial statements for a definition of Adjusted OIBDA.
|
|
Adjusted OIBDA was flat, driven by the increase in revenue discussed
above, partially offset by a 1.3% increase in operating costs. The
increase in operating costs was the result of increases in programming
costs, customer care costs and sales and marketing costs, partially
offset by lower other operating costs.
-
Programming costs (which include intercompany expense from the Other
Operations segment for programming costs associated with the Company's
Los Angeles Lakers' regional sports networks, local sports, news and
lifestyle channels and, beginning in 2014, SportsNet LA) grew 4.7% to
$1.3 billion primarily due to an increase in average monthly
programming costs per video subscriber, partially offset by a decline
in video subscribers. Average monthly programming costs per
residential video subscriber grew 11.1% year over year to $38.96 for
the third quarter of 2014, primarily driven by contractual rate
increases and the carriage of SportsNet LA, partially offset by lower
transactional video-on-demand costs. For the third quarter of 2013,
programming costs were reduced by $10 million due to changes in cost
estimates for programming services primarily resulting from contract
negotiations, changes in programming audit reserves and certain
contract settlements.
-
Customer care costs increased 8.0% to $176 million primarily due to
higher employee costs.
-
Sales and marketing costs increased 3.3% to $375 million primarily due
to headcount growth and higher compensation costs per employee,
including customer retention, partially offset by lower marketing
activities.
-
Other operating costs decreased 20.9% to $185 million primarily due to
declines in voice costs, which decreased $55 million primarily due to
the in-sourcing of voice transport, switching and interconnection
services.
|
|
Residential Services Subscriber Metrics
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
6/30/2014
|
|
|
(Declines)
|
|
|
9/30/2014
|
|
Video
|
|
|
|
|
|
|
11,011
|
|
|
(184
|
)
|
|
|
10,827
|
|
High-speed data
|
|
|
|
|
|
|
11,415
|
|
|
92
|
|
|
|
11,507
|
|
Voice
|
|
|
|
|
|
|
4,975
|
|
|
14
|
|
|
|
4,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single play
|
|
|
|
|
|
|
5,656
|
|
|
18
|
|
|
|
5,674
|
|
Double play
|
|
|
|
|
|
|
4,712
|
|
|
(12
|
)
|
|
|
4,700
|
|
Triple play
|
|
|
|
|
|
|
4,107
|
|
|
(24
|
)
|
|
|
4,083
|
|
Customer relationships
|
|
|
|
|
|
|
14,475
|
|
|
(18
|
)
|
|
|
14,457
|
|
|
|
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.
|
|
|
|
Business Services
Business Services revenue growth was primarily due to increases in
high-speed data and voice subscribers, organic growth in cell tower
backhaul revenue and $29 million of revenue from DukeNet, which was
acquired on December 31, 2013.
|
Selected Business Services Financial Results
|
|
|
|
|
|
|
|
|
(in millions; unaudited)
|
|
|
|
3rd Quarter
|
|
|
Year-to-Date 9/30
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
|
|
|
$
|
93
|
|
$
|
87
|
|
|
$
|
6
|
|
6.9%
|
|
|
$
|
272
|
|
$
|
258
|
|
|
$
|
14
|
|
5.4%
|
High-speed data
|
|
|
|
|
343
|
|
|
282
|
|
|
|
61
|
|
21.6%
|
|
|
|
980
|
|
|
806
|
|
|
|
174
|
|
21.6%
|
Voice
|
|
|
|
|
132
|
|
|
110
|
|
|
|
22
|
|
20.0%
|
|
|
|
373
|
|
|
308
|
|
|
|
65
|
|
21.1%
|
Wholesale transport
|
|
|
|
|
105
|
|
|
65
|
|
|
|
40
|
|
61.5%
|
|
|
|
303
|
|
|
181
|
|
|
|
122
|
|
67.4%
|
Other
|
|
|
|
|
51
|
|
|
50
|
|
|
|
1
|
|
2.0%
|
|
|
|
155
|
|
|
143
|
|
|
|
12
|
|
8.4%
|
Total revenue
|
|
|
|
$
|
724
|
|
$
|
594
|
|
|
$
|
130
|
|
21.9%
|
|
|
$
|
2,083
|
|
$
|
1,696
|
|
|
$
|
387
|
|
22.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA(a)
|
|
|
|
$
|
442
|
|
$
|
344
|
|
|
$
|
98
|
|
28.5%
|
|
|
$
|
1,253
|
|
$
|
982
|
|
|
$
|
271
|
|
27.6%
|
|
(a) Refer to Note 4 to the accompanying consolidated
financial statements for a definition of Adjusted OIBDA.
|
|
The increase in Adjusted OIBDA was driven by growth in revenue,
partially offset by a 12.8% increase in operating costs, primarily as a
result of increased headcount and higher compensation costs per
employee, as well as costs associated with DukeNet. These increases were
partially offset by lower voice costs due to the in-sourcing of voice
transport, switching and interconnection services.
Business Services Subscriber Metrics
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
6/30/2014
|
|
|
Additions
|
|
|
9/30/2014
|
|
Video
|
|
|
|
|
|
|
201
|
|
|
2
|
|
|
203
|
|
High-speed data
|
|
|
|
|
|
|
550
|
|
|
16
|
|
|
566
|
|
Voice
|
|
|
|
|
|
|
302
|
|
|
11
|
|
|
313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single play
|
|
|
|
|
|
|
336
|
|
|
5
|
|
|
341
|
|
Double play
|
|
|
|
|
|
|
249
|
|
|
9
|
|
|
258
|
|
Triple play
|
|
|
|
|
|
|
73
|
|
|
2
|
|
|
75
|
|
Customer relationships
|
|
|
|
|
|
|
658
|
|
|
16
|
|
|
674
|
|
|
|
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.
|
|
Other Operations
Advertising revenue increased primarily due to growth in political
advertising revenue, as well as higher non-political revenue from
advertising inventory sold on behalf of other video distributors.
Political advertising revenue was $26 million for the third quarter of
2014 compared to $12 million for the third quarter of 2013. Other
revenue increased primarily due to affiliate fees from the Residential
Services segment as well as other distributors of the Los Angeles
regional sports networks.
Selected Other Operations Financial Results
|
|
|
|
|
|
|
|
|
(in millions; unaudited)
|
|
|
|
3rd Quarter
|
|
|
Year-to-Date 9/30
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
$
|
276
|
|
$
|
253
|
|
|
$
|
23
|
|
|
9.1
|
%
|
|
|
$
|
795
|
|
$
|
741
|
|
|
$
|
54
|
|
|
7.3
|
%
|
Other
|
|
|
|
|
162
|
|
|
140
|
|
|
|
22
|
|
|
15.7
|
%
|
|
|
|
479
|
|
|
432
|
|
|
|
47
|
|
|
10.9
|
%
|
Total revenue
|
|
|
|
$
|
438
|
|
$
|
393
|
|
|
$
|
45
|
|
|
11.5
|
%
|
|
|
$
|
1,274
|
|
$
|
1,173
|
|
|
$
|
101
|
|
|
8.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA(a)
|
|
|
|
$
|
198
|
|
$
|
241
|
|
|
$
|
(43
|
)
|
|
(17.8
|
%)
|
|
|
$
|
544
|
|
$
|
640
|
|
|
$
|
(96
|
)
|
|
(15.0
|
%)
|
|
(a) Refer to Note 4 to the accompanying consolidated
financial statements for a definition of Adjusted OIBDA.
|
|
The decrease in Adjusted OIBDA was driven by a 57.9% increase in
operating costs, primarily related to SportsNet LA content costs and
growth in costs associated with advertising inventory sold on behalf of
other video distributors, partially offset by growth in revenue.
Shared Functions
Operating costs associated with broad "corporate" functions (e.g.,
accounting and finance, information technology, executive management,
legal and human resources) or functions supporting more than one
reportable segment that are centrally managed (e.g., facilities, network
operations, vehicles and procurement) as well as other activities not
directly attributable to a reportable segment increased 1.3% year over
year to $712 million for the third quarter of 2014. This increase was
driven by increased maintenance expense, partially offset by operating
efficiencies, including decreased headcount.
CONSOLIDATED NET INCOME
Net Income Attributable to TWC Shareholders was $499 million, or
$1.77 per basic common share and $1.76 per diluted common share, for the
third quarter of 2014 compared to $532 million, or $1.86 per basic
common share and $1.84 per diluted common share, for the third quarter
of 2013.
Adjusted Net Income Attributable to TWC Shareholders and Adjusted
Diluted EPS, which exclude certain items affecting the comparability
of TWC's results for 2014 and 2013 detailed in Note 2 to the
accompanying consolidated financial statements, were $527 million and
$1.86, respectively, for the third quarter of 2014 compared to $489
million and $1.69, respectively, for the third quarter of 2013. Adjusted
Diluted EPS for the third quarter of 2014 benefited year over year from
lower average common shares outstanding as a result of share repurchases
under the Company's stock repurchase program prior to its suspension in
February 2014 in connection with the announcement of the Company's
merger with Comcast.
|
|
|
|
|
|
|
|
|
(in millions, except per share data;
|
|
|
|
3rd Quarter
|
|
|
Year-to-Date 9/30
|
unaudited)
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
Net income attributable to TWC shareholders
|
|
|
|
$
|
499
|
|
$
|
532
|
|
|
$
|
(33
|
)
|
|
(6.2
|
%)
|
|
|
$
|
1,477
|
|
$
|
1,414
|
|
|
$
|
63
|
|
4.5
|
%
|
Adjusted net income attributable to TWC shareholders(a)
|
|
|
|
$
|
527
|
|
$
|
489
|
|
|
$
|
38
|
|
|
7.8
|
%
|
|
|
$
|
1,566
|
|
$
|
1,409
|
|
|
$
|
157
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to TWC common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
1.77
|
|
$
|
1.86
|
|
|
$
|
(0.09
|
)
|
|
(4.8
|
%)
|
|
|
$
|
5.25
|
|
$
|
4.85
|
|
|
$
|
0.40
|
|
8.2
|
%
|
Diluted
|
|
|
|
$
|
1.76
|
|
$
|
1.84
|
|
|
$
|
(0.08
|
)
|
|
(4.3
|
%)
|
|
|
$
|
5.22
|
|
$
|
4.81
|
|
|
$
|
0.41
|
|
8.5
|
%
|
Adjusted Diluted EPS(a)
|
|
|
|
$
|
1.86
|
|
$
|
1.69
|
|
|
$
|
0.17
|
|
|
10.1
|
%
|
|
|
$
|
5.53
|
|
$
|
4.80
|
|
|
$
|
0.73
|
|
15.2
|
%
|
|
(a)
|
|
Refer to Note 4 to the accompanying consolidated financial
statements for definitions of Adjusted net income attributable to
TWC shareholders and Adjusted Diluted EPS.
|
|
|
|
SELECTED BALANCE SHEET AND CASH FLOW INFORMATION
Free Cash Flow for the first nine months of 2014 decreased 20.6%
to $1.5 billion from $1.8 billion in the first nine months of 2013, due
mainly to an increase in capital expenditures, partially offset by an
increase in cash provided by operating activities. Capital
Expenditures, which totaled $3.2 billion for the first nine
months of 2014, increased primarily due to the Company's investments
(including TWC Maxx) to improve network reliability, upgrade older
customer premise equipment and expand its network to additional
residences, commercial buildings and cell towers. Cash Provided by
Operating Activities for the first nine months of 2014 was $4.5
billion, a 9.3% increase from the first nine months of 2013. This
increase was primarily driven by lower income tax payments, higher
Adjusted OIBDA and lower interest payments, partially offset by an
increase in working capital requirements. Income tax payments benefited
from certain capital expenditure-related deductions, including the
tangible repair regulations (e.g., de minimus expensing) released in
late 2013, partially offset by the continued reversal of bonus
depreciation benefits recorded in prior years.
|
|
|
|
|
|
|
(in millions; unaudited)
|
|
3rd Quarter
|
|
|
Year-to-Date 9/30
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
Adjusted OIBDA(a)
|
|
$
|
2,054
|
|
|
$
|
2,005
|
|
|
|
$
|
49
|
|
|
2.4
|
%
|
|
|
$
|
6,088
|
|
|
$
|
5,954
|
|
|
|
$
|
134
|
|
|
2.3
|
%
|
Interest payments, net
|
|
|
(442
|
)
|
|
|
(502
|
)
|
|
|
|
60
|
|
|
(12.0
|
%)
|
|
|
(1,187
|
)
|
|
(1,304
|
)
|
|
|
|
117
|
|
|
(9.0
|
%)
|
Income tax payments, net
|
|
|
(191
|
)
|
|
|
(281
|
)
|
|
|
|
90
|
|
|
(32.0
|
%)
|
|
|
(286
|
)
|
|
(471
|
)
|
|
|
|
185
|
|
|
(39.3
|
%)
|
All other, net, including working capital changes(b)
|
|
|
27
|
|
|
|
(13
|
)
|
|
|
|
40
|
|
|
(307.7
|
%)
|
|
|
|
(75
|
)
|
|
|
(25
|
)
|
|
|
|
(50
|
)
|
|
200.0
|
%
|
Cash provided by operating activities(b)
|
|
|
1,448
|
|
|
|
1,209
|
|
|
|
|
239
|
|
|
19.8
|
%
|
|
|
|
4,540
|
|
|
|
4,154
|
|
|
|
|
386
|
|
|
9.3
|
%
|
Add: Excess tax benefit from exercise of stock options
|
|
|
32
|
|
|
|
15
|
|
|
|
|
17
|
|
|
113.3
|
%
|
|
|
|
131
|
|
|
|
81
|
|
|
|
|
50
|
|
|
61.7
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(1,105
|
)
|
|
|
(774
|
)
|
|
|
|
(331
|
)
|
|
42.8
|
%
|
|
|
(3,179
|
)
|
|
(2,371
|
)
|
|
|
|
(808
|
)
|
|
34.1
|
%
|
Cash paid for other intangible assets
|
|
|
(7
|
)
|
|
|
(10
|
)
|
|
|
|
3
|
|
|
(30.0
|
%)
|
|
|
|
(31
|
)
|
|
|
(30
|
)
|
|
|
|
(1
|
)
|
|
3.3
|
%
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
NM
|
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
|
(4
|
)
|
|
400.0
|
%
|
Free Cash Flow(a)(b)
|
|
|
368
|
|
|
|
440
|
|
|
|
|
(72
|
)
|
|
(16.4
|
%)
|
|
|
|
1,456
|
|
|
|
1,833
|
|
|
|
|
(377
|
)
|
|
(20.6
|
%)
|
Economic Stimulus Act impacts(c)
|
|
|
97
|
|
|
|
19
|
|
|
|
|
78
|
|
|
410.5
|
%
|
|
|
|
292
|
|
|
|
58
|
|
|
|
|
234
|
|
|
403.4
|
%
|
Free Cash Flow excluding Economic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stimulus Act impacts
|
|
$
|
465
|
|
|
$
|
459
|
|
|
|
$
|
6
|
|
|
1.3
|
%
|
|
|
$
|
1,748
|
|
|
$
|
1,891
|
|
|
|
$
|
(143
|
)
|
|
(7.6
|
%)
|
|
NM-Not meaningful.
|
(a)
|
|
Refer to Note 4 to the accompanying consolidated financial
statements for definitions of Adjusted OIBDA and Free Cash Flow.
|
(b)
|
|
All other, net, including working capital changes includes
merger-related and restructuring payments of $22 million and $27
million for the third quarters of 2014 and 2013, respectively, and
$109 million and $91 million for the nine months ended September 30,
2014 and 2013, respectively, which reduced cash provided by
operating activities and Free Cash Flow for the respective periods.
|
(c)
|
|
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, which totaled $23.8 billion as of September 30, 2014,
decreased from December 31, 2013 as Free Cash Flow more than offset the
cash used for dividends and share repurchases (prior to the suspension
of the stock repurchase program in February 2014 in connection with the
announcement of the Company's merger with Comcast).
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions; unaudited)
|
|
|
|
|
|
|
9/30/2014
|
|
|
|
12/31/2013
|
Long-term debt
|
|
|
|
|
|
|
$
|
22,762
|
|
|
|
|
$
|
23,285
|
|
Debt due within one year
|
|
|
|
|
|
|
|
1,540
|
|
|
|
|
|
1,767
|
|
Total debt
|
|
|
|
|
|
|
|
24,302
|
|
|
|
|
|
25,052
|
|
Cash and equivalents
|
|
|
|
|
|
|
|
(526
|
)
|
|
|
|
|
(525
|
)
|
Net debt(a)
|
|
|
|
|
|
|
$
|
23,776
|
|
|
|
|
$
|
24,527
|
|
|
(a) Net debt is defined as total debt less cash and
equivalents.
|
|
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 net income
attributable to TWC shareholders, Adjusted Diluted EPS and Free Cash
Flow. Refer to Note 4 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 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 enterprise-class, cloud-enabled hosting, managed
applications and services. Time Warner Cable Media, the advertising
sales 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 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, October 30, 2014. 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., including its
proposed merger with Comcast Corporation. More detailed information
about these factors may be found in filings by Time Warner Cable Inc.
with the Securities and Exchange Commission, including its most recent
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Time
Warner Cable is under no obligation to, and expressly disclaims any such
obligation to, update or alter its forward-looking statements, whether
as a result of new information, future events, or otherwise.
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TIME WARNER CABLE INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
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September 30,
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December 31,
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2014
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2013
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(in millions)
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ASSETS
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Current assets:
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Cash and equivalents
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$
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526
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$
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525
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Receivables, less allowances of $134 million and $77 million as of
September 30, 2014 and December 31, 2013, respectively
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950
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954
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Deferred income tax assets
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319
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334
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Other current assets
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279
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331
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Total current assets
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2,074
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2,144
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Investments
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69
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56
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Property, plant and equipment, net
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15,794
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15,056
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Intangible assets subject to amortization, net
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549
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552
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Intangible assets not subject to amortization
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26,012
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26,012
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Goodwill
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3,138
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3,196
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Other assets
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1,000
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|
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1,257
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Total assets
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$
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48,636
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$
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48,273
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable
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$
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462
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$
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565
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Deferred revenue and subscriber-related liabilities
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193
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188
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Accrued programming and content expense
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902
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869
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Current maturities of long-term debt
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1,540
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1,767
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Other current liabilities
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1,922
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|
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1,837
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Total current liabilities
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5,019
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5,226
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Long-term debt
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22,762
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23,285
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Deferred income tax liabilities, net
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12,230
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12,098
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Other liabilities
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716
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717
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TWC shareholders' equity:
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Common stock, $0.01 par value, 280.4 million and 277.9 million
shares issued and outstanding as of September 30, 2014 and
December 31, 2013, respectively
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3
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3
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Additional paid-in capital
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7,093
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6,951
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Retained earnings (accumulated deficit)
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824
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(55
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)
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Accumulated other comprehensive income (loss), net
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(15
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)
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44
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Total TWC shareholders' equity
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7,905
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6,943
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Noncontrolling interests
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4
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|
|
|
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4
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Total equity
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7,909
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|
|
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6,947
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Total liabilities and equity
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$
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48,636
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|
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$
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48,273
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See accompanying notes.
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TIME WARNER CABLE INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
|
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2014
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2013
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2014
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2013
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(recast)
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(recast)
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(in millions, except per share data)
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Revenue
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$
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5,714
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$
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5,518
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$
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17,022
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$
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16,543
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Costs and expenses:
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Programming and content
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1,326
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|
1,210
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3,976
|
|
|
3,719
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Sales and marketing
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556
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|
528
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1,655
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1,497
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Technical operations
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401
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394
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1,143
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|
1,129
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Customer care
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|
210
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|
191
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|
622
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|
575
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Other operating
|
|
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|
|
1,167
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1,190
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|
3,538
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|
|
3,669
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Depreciation
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|
824
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|
790
|
|
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|
2,394
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|
|
2,371
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Amortization
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|
33
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|
|
32
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|
101
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|
95
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Merger-related and restructuring costs
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46
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|
|
23
|
|
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|
187
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|
|
81
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|
Total costs and expenses
|
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|
4,563
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|
|
4,358
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|
13,616
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|
|
13,136
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Operating Income
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|
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|
|
1,151
|
|
|
1,160
|
|
|
|
3,406
|
|
|
3,407
|
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Interest expense, net
|
|
|
|
|
(353)
|
|
|
(379)
|
|
|
|
(1,066)
|
|
|
(1,175)
|
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Other income, net
|
|
|
|
|
5
|
|
|
-
|
|
|
|
28
|
|
|
10
|
|
Income before income taxes
|
|
|
|
|
803
|
|
|
781
|
|
|
|
2,368
|
|
|
2,242
|
|
Income tax provision
|
|
|
|
|
(304)
|
|
|
(249)
|
|
|
|
(891)
|
|
|
(828)
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Net income
|
|
|
|
|
499
|
|
|
532
|
|
|
|
1,477
|
|
|
1,414
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
Net income attributable to TWC shareholders
|
|
|
|
$
|
499
|
|
$
|
532
|
|
|
$
|
1,477
|
|
$
|
1,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to TWC common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
|
|
|
|
$
|
1.77
|
|
$
|
1.86
|
|
|
$
|
5.25
|
|
$
|
4.85
|
|
Diluted
|
|
|
|
$
|
1.76
|
|
$
|
1.84
|
|
|
$
|
5.22
|
|
$
|
4.81
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
|
|
|
|
|
279.8
|
|
|
285.0
|
|
|
|
278.8
|
|
|
289.9
|
|
Diluted
|
|
|
|
|
283.5
|
|
|
289.0
|
|
|
|
282.5
|
|
|
293.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share of common stock
|
|
|
|
$
|
0.75
|
|
$
|
0.65
|
|
|
$
|
2.25
|
|
$
|
1.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
See accompanying notes.
|
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|
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|
|
|
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|
|
|
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TIME WARNER CABLE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
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Nine Months Ended
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
2014
|
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2013
|
|
|
|
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|
(in millions)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
1,477
|
|
|
|
$
|
1,414
|
|
|
Adjustments for noncash and nonoperating items:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
2,394
|
|
|
|
|
2,371
|
|
|
Amortization
|
|
|
|
|
101
|
|
|
|
|
95
|
|
|
Income from equity-method investments, net of cash distributions
|
|
|
|
|
(19
|
)
|
|
|
|
(9
|
)
|
|
Deferred income taxes
|
|
|
|
|
185
|
|
|
|
|
353
|
|
|
Equity-based compensation expense
|
|
|
|
|
138
|
|
|
|
|
100
|
|
|
Excess tax benefit from equity-based compensation
|
|
|
|
|
(131
|
)
|
|
|
|
(81
|
)
|
|
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
|
|
20
|
|
|
|
|
17
|
|
|
Accounts payable and other liabilities
|
|
|
|
|
317
|
|
|
|
|
(137
|
)
|
|
Other changes
|
|
|
|
|
58
|
|
|
|
|
31
|
|
|
Cash provided by operating activities
|
|
|
|
|
4,540
|
|
|
|
|
4,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
(3,179
|
)
|
|
|
|
(2,371
|
)
|
|
Purchases of investments
|
|
|
|
|
(2
|
)
|
|
|
|
(586
|
)
|
|
Return of capital from investees
|
|
|
|
|
-
|
|
|
|
|
7
|
|
|
Proceeds from sale, maturity and collection of investments
|
|
|
|
|
18
|
|
|
|
|
476
|
|
|
Acquisition of intangible assets
|
|
|
|
|
(31
|
)
|
|
|
|
(30
|
)
|
|
Other investing activities
|
|
|
|
|
22
|
|
|
|
|
19
|
|
|
Cash used by investing activities
|
|
|
|
|
(3,172
|
)
|
|
|
|
(2,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings, net
|
|
|
|
|
1,027
|
|
|
|
|
-
|
|
|
Repayments of long-term debt
|
|
|
|
|
(1,750
|
)
|
|
|
|
(1,500
|
)
|
|
Redemption of mandatorily redeemable preferred equity
|
|
|
|
|
-
|
|
|
|
|
(300
|
)
|
|
Dividends paid
|
|
|
|
|
(642
|
)
|
|
|
|
(573
|
)
|
|
Repurchases of common stock
|
|
|
|
|
(259
|
)
|
|
|
|
(1,856
|
)
|
|
Proceeds from exercise of stock options
|
|
|
|
|
199
|
|
|
|
|
124
|
|
|
Excess tax benefit from equity-based compensation
|
|
|
|
|
131
|
|
|
|
|
81
|
|
|
Taxes paid in cash in lieu of shares issued for equity-based
compensation
|
|
|
|
|
(74
|
)
|
|
|
|
(64
|
)
|
|
Other financing activities
|
|
|
|
|
1
|
|
|
|
|
(9
|
)
|
|
Cash used by financing activities
|
|
|
|
|
(1,367
|
)
|
|
|
|
(4,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and equivalents
|
|
|
|
|
1
|
|
|
|
|
(2,428
|
)
|
|
Cash and equivalents at beginning of period
|
|
|
|
|
525
|
|
|
|
|
3,304
|
|
|
Cash and equivalents at end of period
|
|
|
|
$
|
526
|
|
|
|
$
|
876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
1. COMCAST MERGER
|
|
|
|
On February 12, 2014, the Company entered into an Agreement and Plan
of Merger (the "Agreement") with Comcast Corporation ("Comcast")
whereby the Company agreed to merge with and into a 100% owned
subsidiary of Comcast (the "Comcast merger"). Upon completion of the
Comcast merger, all of the outstanding shares of the Company will be
cancelled and each issued and outstanding share will be converted
into the right to receive 2.875 shares of Class A common stock of
Comcast. At their special meetings on October 8, 2014 and October 9,
2014, respectively, Comcast's shareholders approved the issuance of
Comcast Class A common stock to TWC stockholders in the Comcast
merger and TWC stockholders approved the adoption of the Agreement.
TWC and Comcast expect to complete the Comcast merger in early 2015,
subject to receipt of regulatory approvals, as well as satisfaction
of certain other closing conditions.
|
|
|
|
On April 25, 2014, Comcast entered into a binding agreement with
Charter Communications, Inc., ("Charter"), which contemplates three
transactions (the "divestiture transactions"): (1) a contribution,
spin-off and merger transaction, (2) an asset exchange and (3) a
sale of assets. The completion of the divestiture transactions will
result in the combined company divesting a net total of
approximately 3.9 million video subscribers, a portion of which are
TWC subscribers (primarily in the Midwest). The divestiture
transactions are expected to occur contemporaneously with one
another and are conditioned upon and will occur following the
closing of the Comcast merger. They are also subject to a number of
other conditions. The Comcast merger is not conditioned upon the
closing of the divestiture transactions and, accordingly, the
Comcast merger can be completed regardless of whether the
divestiture transactions are ultimately completed.
|
|
|
|
2. ITEMS AFFECTING COMPARABILITY
|
|
The following items affected the comparability of TWC's results for
the three and nine months ended September 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
3rd Quarter 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
2,008
|
|
|
$
|
(857
|
)
|
|
$
|
1,151
|
|
|
$
|
(348
|
)
|
|
$
|
(304
|
)
|
|
$
|
499
|
|
|
$
|
1.76
|
|
Year-over-year change, as reported:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
$
|
26
|
|
|
$
|
(35
|
)
|
|
$
|
(9
|
)
|
|
$
|
31
|
|
|
$
|
(55
|
)
|
|
$
|
(33
|
)
|
|
$
|
(0.08
|
)
|
%
|
|
1.3
|
%
|
|
4.3
|
%
|
|
(0.8
|
%)
|
|
(8.2
|
%)
|
|
22.1
|
%
|
|
(6.2
|
%)
|
|
(4.3
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
46
|
|
|
|
-
|
|
|
|
46
|
|
|
|
-
|
|
|
|
(18
|
)
|
|
|
28
|
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
$
|
2,054
|
|
|
$
|
(857
|
)
|
|
$
|
1,197
|
|
|
$
|
(348
|
)
|
|
$
|
(322
|
)
|
|
$
|
527
|
|
|
$
|
1.86
|
|
Year-over-year change, as adjusted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
$
|
49
|
|
|
$
|
(35
|
)
|
|
$
|
14
|
|
|
$
|
28
|
|
|
$
|
(4
|
)
|
|
$
|
38
|
|
|
$
|
0.17
|
|
%
|
|
2.4
|
%
|
|
4.3
|
%
|
|
1.2
|
%
|
|
(7.4
|
%)
|
|
1.3
|
%
|
|
7.8
|
%
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3rd Quarter 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
1,982
|
|
|
$
|
(822
|
)
|
|
$
|
1,160
|
|
|
$
|
(379
|
)
|
|
$
|
(249
|
)
|
|
$
|
532
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
23
|
|
|
|
-
|
|
|
|
23
|
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
14
|
|
|
|
0.05
|
|
Loss on equity award reimbursement obligation to Time Warner(b)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
2
|
|
|
|
-
|
|
Impact of certain state and local tax matters(c)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(27
|
)
|
|
|
(27
|
)
|
|
|
(0.09
|
)
|
Change in net deferred income tax liability effective tax rate(d)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(32
|
)
|
|
|
(32
|
)
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
$
|
2,005
|
|
|
$
|
(822
|
)
|
|
$
|
1,183
|
|
|
$
|
(376
|
)
|
|
$
|
(318
|
)
|
|
$
|
489
|
|
|
$
|
1.69
|
|
_____________________
|
(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. Diluted EPS reflects the more dilutive earnings
per share amount calculated using the treasury stock method or the
two-class method.
|
(b)
|
|
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. 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 represents a benefit recorded as a result of income tax
reform legislation enacted in North Carolina.
|
(d)
|
|
Amount represents a benefit primarily related to changes in the tax
rate applied to calculate the Company's net deferred income tax
liability as a result of changes to state tax apportionment factors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
Year-to-Date 9/30/2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
$
|
5,901
|
|
$
|
(2,495)
|
|
$
|
3,406
|
|
$
|
(1,038)
|
|
$
|
(891)
|
|
$
|
1,477
|
|
$
|
5.22
|
|
Year-over-year change, as reported:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
28
|
|
$
|
(29)
|
|
$
|
(1)
|
|
$
|
127
|
|
$
|
(63)
|
|
$
|
63
|
|
$
|
0.41
|
|
%
|
|
|
0.5%
|
|
1.2%
|
|
-
|
|
(10.9%)
|
|
7.6%
|
|
4.5%
|
|
8.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
|
187
|
|
|
-
|
|
|
187
|
|
|
-
|
|
|
(73)
|
|
|
114
|
|
|
0.40
|
|
Gain on equity award reimbursement obligation to Time Warner(b)
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1)
|
|
|
-
|
|
|
(1)
|
|
|
-
|
|
Impact of certain state and local tax matters(c)
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(24)
|
|
|
(24)
|
|
|
(0.09)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
|
$
|
6,088
|
|
$
|
(2,495)
|
|
$
|
3,593
|
|
$
|
(1,039)
|
|
$
|
(988)
|
|
$
|
1,566
|
|
$
|
5.53
|
|
Year-over-year change, as adjusted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
134
|
|
$
|
(29)
|
|
$
|
105
|
|
$
|
118
|
|
$
|
(66)
|
|
$
|
157
|
|
$
|
0.73
|
|
%
|
|
|
2.3%
|
|
1.2%
|
|
3.0%
|
|
(10.2%)
|
|
7.2%
|
|
11.1%
|
|
15.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date 9/30/2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
$
|
5,873
|
|
$
|
(2,466)
|
|
$
|
3,407
|
|
$
|
(1,165)
|
|
$
|
(828)
|
|
$
|
1,414
|
|
$
|
4.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
|
81
|
|
|
-
|
|
|
81
|
|
|
-
|
|
|
(32)
|
|
|
49
|
|
|
0.17
|
|
Loss on equity award reimbursement obligation to Time Warner(b)
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8
|
|
|
(3)
|
|
|
5
|
|
|
0.02
|
|
Impact of certain state and local tax matters(c)
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(27)
|
|
|
(27)
|
|
|
(0.09)
|
|
Change in net deferred income tax liability effective tax rate(d)
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(32)
|
|
|
(32)
|
|
|
(0.11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
|
$
|
5,954
|
|
$
|
(2,466)
|
|
$
|
3,488
|
|
$
|
(1,157)
|
|
$
|
(922)
|
|
$
|
1,409
|
|
$
|
4.80
|
|
_____________________
|
(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. Diluted EPS reflects the more dilutive earnings
per share amount calculated using the treasury stock method or the
two-class method.
|
(b)
|
|
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 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)
|
|
2014 amount represents the impact of the passage of the New York
State budget during the first quarter of 2014 that, in part, lowers
the New York State business tax rate beginning in 2016. 2013 amount
represents a benefit recorded as a result of income tax reform
legislation enacted in North Carolina.
|
(d)
|
|
Amount represents a benefit primarily related to changes in the tax
rate applied to calculate the Company's net deferred income tax
liability as a result of changes to state tax apportionment factors.
|
|
|
|
3.
|
|
RECONCILIATION OF ADJUSTED OIBDA TO OPERATING INCOME AND OTHER
SEGMENT INFORMATION
|
|
|
|
|
|
Consolidated information for the three and nine months ended
September 30, 2014 and 2013 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
3rd Quarter
|
|
|
Year-to-Date 9/30
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2014
|
|
2013
|
|
$
|
|
%
|
|
|
2014
|
|
2013
|
|
|
$
|
|
%
|
Adjusted OIBDA(a)
|
|
|
$
|
2,054
|
|
|
$
|
2,005
|
|
|
$
|
49
|
|
|
2.4
|
%
|
|
|
$
|
6,088
|
|
|
$
|
5,954
|
|
|
|
$
|
134
|
|
|
2.3
|
%
|
Adjusted OIBDA margin(b)
|
|
|
35.9
|
%
|
|
36.3
|
%
|
|
|
|
|
|
|
35.8
|
%
|
|
36.0
|
%
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
|
(46
|
)
|
|
|
(23
|
)
|
|
|
(23
|
)
|
|
100.0
|
%
|
|
|
|
(187
|
)
|
|
|
(81
|
)
|
|
|
|
(106
|
)
|
|
130.9
|
%
|
OIBDA(a)
|
|
|
|
2,008
|
|
|
|
1,982
|
|
|
|
26
|
|
|
1.3
|
%
|
|
|
5,901
|
|
|
5,873
|
|
|
|
|
28
|
|
|
0.5
|
%
|
Depreciation
|
|
|
|
(824
|
)
|
|
|
(790
|
)
|
|
|
(34
|
)
|
|
4.3
|
%
|
|
|
(2,394
|
)
|
|
(2,371
|
)
|
|
|
|
(23
|
)
|
|
1.0
|
%
|
Amortization
|
|
|
|
(33
|
)
|
|
|
(32
|
)
|
|
|
(1
|
)
|
|
3.1
|
%
|
|
|
(101
|
)
|
|
(95
|
)
|
|
|
|
(6
|
)
|
|
6.3
|
%
|
Operating Income
|
|
|
$
|
1,151
|
|
|
$
|
1,160
|
|
|
$
|
(9
|
)
|
|
(0.8
|
%)
|
|
|
$
|
3,406
|
|
|
$
|
3,407
|
|
|
|
$
|
(1
|
)
|
|
-
|
|
_____________________
|
|
(a)
|
|
Refer to Note 4 for definitions of OIBDA and Adjusted OIBDA.
|
|
(b)
|
|
Adjusted OIBDA margin is defined as Adjusted OIBDA as a percentage
of total revenue.
|
|
|
|
|
|
Effective in the first quarter of 2014, the Company determined it has
three reportable segments. The Company has recast its financial
information and disclosures for the prior periods to reflect the segment
disclosures as if the current presentation had been in effect throughout
all periods presented.
The Company classifies its operations into the following reportable
segments:
-
Residential Services, which principally consists of video, high-speed
data and voice services provided to residential customers as well as
other residential services, including security and home management
services.
-
Business Services, which principally consists of data, video and voice
services provided to business customers as well as other business
services, including enterprise-class, cloud-enabled hosting, managed
applications and services.
-
Other Operations, which principally consists of (i) Time Warner Cable
Media ("TWC Media"), the advertising sales arm of TWC, (ii) TWC-owned
and/or operated regional sports networks ("RSNs") and local sports,
news and lifestyle channels (e.g., Time Warner Cable News NY1) and
(iii) other operating revenue and costs, including those derived from
the Advance/Newhouse Partnership and home shopping network-related
services. The business units reflected in the Other Operations segment
individually do not meet the thresholds to be reported as separate
reportable segments.
In addition to the above reportable segments, the Company has shared
functions (referred to as "Shared Functions") that include activities
not attributable to a specific reportable segment. Shared Functions
consists of operating costs and expenses associated with broad
"corporate" functions (e.g., accounting and finance, information
technology, executive management, legal and human resources) or
functions supporting more than one reportable segment that are centrally
managed (e.g., facilities, network operations, vehicles and procurement)
as well as other activities not attributable to a reportable segment. As
such, the reportable segment results reflect how management views such
segments in assessing financial performance and allocating resources and
are not necessarily indicative of the results of operations that each
segment would have achieved had they operated as stand-alone entities
during the periods presented.
In evaluating the profitability of the Company's segments, the
components of net income (loss) below OIBDA, as defined below, are not
separately evaluated by management at the segment level. Due to the
nature of the Company's operations, a majority of its assets, including
its distribution systems, are utilized across the Company's operations
and are not segregated by segment. In addition, segment assets are not
reported to, or used by, management to allocate resources or assess the
performance of the Company's segments. Accordingly, the Company has not
disclosed asset information by segment.
Segment information for the three and nine months ended September 30,
2014 and 2013 is as follows:
(in millions)
|
|
|
3rd Quarter 2014
|
|
|
|
Residential
|
|
Business
|
|
Other
|
|
|
|
|
|
|
|
|
|
Services
|
|
Services
|
|
Operations
|
|
Shared
|
|
Intersegment
|
|
Total
|
|
|
|
Segment
|
|
Segment
|
|
Segment
|
|
Functions
|
|
Eliminations
|
|
Consolidated
|
Revenue(a)
|
|
|
$
|
4,615
|
|
|
$
|
724
|
|
|
$
|
438
|
|
|
$
|
-
|
|
|
$
|
(63
|
)
|
|
$
|
5,714
|
|
Operating costs and expenses
|
|
|
|
(2,489
|
)
|
|
|
(282
|
)
|
|
|
(240
|
)
|
|
|
(712
|
)
|
|
|
63
|
|
|
|
(3,660
|
)
|
Adjusted OIBDA(b)
|
|
|
|
2,126
|
|
|
|
442
|
|
|
|
198
|
|
|
|
(712
|
)
|
|
|
-
|
|
|
|
2,054
|
|
Merger-related and restructuring costs
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(46
|
)
|
|
|
-
|
|
|
|
(46
|
)
|
OIBDA(b)
|
|
|
$
|
2,126
|
|
|
$
|
442
|
|
|
$
|
198
|
|
|
$
|
(758
|
)
|
|
$
|
-
|
|
|
|
2,008
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(824
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33
|
)
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,151
|
|
_____________________
|
(a)
|
|
All revenue included in Intersegment Eliminations is associated
with the Other Operations segment.
|
(b)
|
|
Refer to Note 4 for definitions of OIBDA and Adjusted OIBDA.
|
|
|
|
|
(in millions)
|
|
|
3rd Quarter 2013
|
|
|
|
Residential
|
|
Business
|
|
Other
|
|
|
|
|
|
|
|
|
|
Services
|
|
Services
|
|
Operations
|
|
Shared
|
|
Intersegment
|
|
Total
|
|
|
|
Segment
|
|
Segment
|
|
Segment
|
|
Functions
|
|
Eliminations
|
|
Consolidated
|
Revenue(a)
|
|
|
$
|
4,579
|
|
|
$
|
594
|
|
|
$
|
393
|
|
|
$
|
-
|
|
|
$
|
(48
|
)
|
|
$
|
5,518
|
|
Operating costs and expenses
|
|
|
|
(2,456
|
)
|
|
|
(250
|
)
|
|
|
(152
|
)
|
|
|
(703
|
)
|
|
|
48
|
|
|
|
(3,513
|
)
|
Adjusted OIBDA(b)
|
|
|
|
2,123
|
|
|
|
344
|
|
|
|
241
|
|
|
|
(703
|
)
|
|
|
-
|
|
|
|
2,005
|
|
Merger-related and restructuring costs
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(23
|
)
|
|
|
-
|
|
|
|
(23
|
)
|
OIBDA(b)
|
|
|
$
|
2,123
|
|
|
$
|
344
|
|
|
$
|
241
|
|
|
$
|
(726
|
)
|
|
$
|
-
|
|
|
|
1,982
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(790
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,160
|
|
_____________________
|
(a)
|
|
All revenue included in Intersegment Eliminations is associated with
the Other Operations segment.
|
(b)
|
|
Refer to Note 4 for definitions of OIBDA and Adjusted OIBDA.
|
|
|
|
|
(in millions)
|
|
|
Year-to-Date 9/30/2014
|
|
|
|
Residential
|
|
Business
|
|
Other
|
|
|
|
|
|
|
|
|
|
Services
|
|
Services
|
|
Operations
|
|
Shared
|
|
Intersegment
|
|
Total
|
|
|
|
Segment
|
|
Segment
|
|
Segment
|
|
Functions
|
|
Eliminations
|
|
Consolidated
|
Revenue(a)
|
|
|
$
|
13,845
|
|
|
$
|
2,083
|
|
|
$
|
1,274
|
|
|
$
|
-
|
|
|
$
|
(180
|
)
|
|
$
|
17,022
|
|
Operating costs and expenses
|
|
|
|
(7,395
|
)
|
|
|
(830
|
)
|
|
|
(730
|
)
|
|
|
(2,159
|
)
|
|
|
180
|
|
|
|
(10,934
|
)
|
Adjusted OIBDA(b)
|
|
|
|
6,450
|
|
|
|
1,253
|
|
|
|
544
|
|
|
|
(2,159
|
)
|
|
|
-
|
|
|
|
6,088
|
|
Merger-related and restructuring costs
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(187
|
)
|
|
|
-
|
|
|
|
(187
|
)
|
OIBDA(b)
|
|
|
$
|
6,450
|
|
|
$
|
1,253
|
|
|
$
|
544
|
|
|
$
|
(2,346
|
)
|
|
$
|
-
|
|
|
|
5,901
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,394
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101
|
)
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,406
|
|
_____________________
|
(a)
|
|
All revenue included in Intersegment Eliminations is associated with
the Other Operations segment.
|
(b)
|
|
Refer to Note 4 for definitions of OIBDA and Adjusted OIBDA.
|
|
|
|
|
(in millions)
|
|
|
Year-to-Date 9/30/2013
|
|
|
|
Residential
|
|
Business
|
|
Other
|
|
|
|
|
|
|
|
|
|
Services
|
|
Services
|
|
Operations
|
|
Shared
|
|
Intersegment
|
|
Total
|
|
|
|
Segment
|
|
Segment
|
|
Segment
|
|
Functions
|
|
Eliminations
|
|
Consolidated
|
Revenue(a)
|
|
|
$
|
13,822
|
|
|
$
|
1,696
|
|
|
$
|
1,173
|
|
|
$
|
-
|
|
|
$
|
(148
|
)
|
|
$
|
16,543
|
|
Operating costs and expenses
|
|
|
|
(7,328
|
)
|
|
|
(714
|
)
|
|
|
(533
|
)
|
|
|
(2,162
|
)
|
|
|
148
|
|
|
|
(10,589
|
)
|
Adjusted OIBDA(b)
|
|
|
|
6,494
|
|
|
|
982
|
|
|
|
640
|
|
|
|
(2,162
|
)
|
|
|
-
|
|
|
|
5,954
|
|
Merger-related and restructuring costs
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(81
|
)
|
|
|
-
|
|
|
|
(81
|
)
|
OIBDA(b)
|
|
|
$
|
6,494
|
|
|
$
|
982
|
|
|
$
|
640
|
|
|
$
|
(2,243
|
)
|
|
$
|
-
|
|
|
|
5,873
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,371
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,407
|
|
_____________________
|
(a)
|
|
All revenue included in Intersegment Eliminations is associated with
the Other Operations segment.
|
(b)
|
|
Refer to Note 4 for definitions of OIBDA and Adjusted OIBDA.
|
|
|
|
Intersegment Eliminations relates to the programming provided to the
Residential Services and Business Services segments by the Company's
RSNs and local sports, news and lifestyle channels. These services are
reflected as programming expense for the Residential Services and
Business Services segments and as revenue for the Other Operations
segment.
4. USE OF NON-GAAP FINANCIAL MEASURES
In discussing its consolidated and segment 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 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; and merger-related and restructuring costs.
-
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; and
certain changes to income tax provision; as well as the impact of
taxes 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 Company's consolidated and segment performance 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 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. Management also uses these
measures to allocate resources and capital to the segments. Adjusted
OIBDA is also a significant performance measure 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 Free Cash
Flow, which reflects capital expenditure decisions, and net income
attributable to TWC shareholders, which reflects the periodic costs of
capitalized assets. Adjusted OIBDA does 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 and Adjusted OIBDA also fail to reflect the
significant costs borne by the Company for income taxes and debt
servicing costs, 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.
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