[July 31, 2014] |
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Time Warner Cable Reports 2014 Second-Quarter Results
NEW YORK --(Business Wire)--
Time Warner Cable Inc. (NYSE:TWC) today reported financial results for
its second quarter ended June 30, 2014.
Time Warner Cable Chairman and CEO Rob Marcus said: "Time Warner Cable
posted another very good quarter. We delivered the best second-quarter
subscriber volumes in years, accelerated ARPU growth and made terrific
progress on our strategic and operating initiatives. I want to commend
our team for remaining laser focused on executing our operating plan,
while at the same time working hard to complete our merger with Comcast."
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SELECTED CONSOLIDATED FINANCIAL RESULTS
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(in millions, except per share data;
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2nd Quarter
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Year-to-Date 6/30
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unaudited)
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Change
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Change
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2014
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2013
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$
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%
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2014
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2013
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$
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%
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Revenue
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$
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5,726
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$
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5,550
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$
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176
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3.2
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%
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$
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11,308
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$
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11,025
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$
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283
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2.6
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%
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Adjusted OIBDA(a)
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$
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2,054
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$
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2,037
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$
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17
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0.8
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%
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$
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4,034
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$
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3,949
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$
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85
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2.2
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%
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Operating Income(b)
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$
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1,163
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$
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1,187
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$
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(24
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(2.0
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%)
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$
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2,255
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$
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2,247
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$
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8
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0.4
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%
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Diluted EPS(c)
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$
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1.76
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$
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1.64
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$
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0.12
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7.3
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%
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$
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3.46
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$
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2.98
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$
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0.48
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16.1
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%
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Adjusted Diluted EPS(a)
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$
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1.89
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$
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1.69
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$
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0.20
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11.8
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%
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$
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3.68
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$
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3.10
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$
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0.58
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18.7
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%
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Cash provided by operating activities(b)
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$
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1,695
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$
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1,551
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$
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144
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9.3
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%
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$
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3,092
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$
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2,945
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$
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147
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5.0
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%
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Capital expenditures
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$
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1,240
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$
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827
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$
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413
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49.9
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%
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$
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2,074
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$
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1,597
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$
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477
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29.9
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%
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Free Cash Flow(a)(b)
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$
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459
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$
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732
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$
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(273
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(37.3
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%)
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$
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1,088
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$
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1,393
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$
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(305
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(21.9
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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.
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(b)
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Operating Income is reduced by merger-related and restructuring
costs of $61 million and $27 million for the second quarters of 2014
and 2013, respectively, and $141 million and $58 million for the six
months ended June 30, 2014 and 2013, respectively. Cash provided by
operating activities and Free Cash Flow are reduced by
merger-related and restructuring payments of $29 million and $35
million for the second quarters of 2014 and 2013, respectively, and
$87 million and $64 million for the six months ended June 30, 2014
and 2013, respectively.
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(c)
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Diluted EPS represents net income per diluted common share
attributable to TWC common shareholders.
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HIGHLIGHTS
Financial Highlights
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Second-quarter 2014 revenue grew 3.2% year over year, driven primarily
by growth of 22.3% in business services revenue and 12.8% growth in
residential high-speed data revenue. Sequential quarterly revenue
growth of $144 million was the highest organic growth in seven years.
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Adjusted Diluted EPS increased 11.8% to $1.89. Diluted EPS increased
7.3% to $1.76.
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Second-quarter 2014 average monthly revenue per residential customer
relationship (ARPU) grew 1.7% to $106.98. Residential high-speed data
ARPU increased 9.7% to $46.92.
Operational Highlights
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Overall second-quarter subscriber performance was the best in years.
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Residential customer relationship net declines of 34,000 - best
second quarter in five years
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Residential triple play net additions of 42,000 - best second
quarter in two years
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Residential high-speed data net additions of 67,000 - best second
quarter in four years
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Residential voice net additions of 79,000 - best second quarter in
five years
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Residential video net declines of 152,000 - best second quarter in
three years
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Business primary service unit and customer relationship net
additions of 37,000 and 21,000, respectively - highest quarter ever
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"TWC Maxx" rollout, including conversion to an all-digital network and
high-speed data speed increases to as much as 300 Mbps, continues to
progress in New York City and Los Angeles and has recently begun in
Austin, Texas.
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TWC's cloud-based guide with an advanced VOD portal was installed on
5.8 million set-top boxes at the end of the second quarter.
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Business Services continued to benefit from the addition of buildings
and cell towers to the network, expansion of the sales force and
improved sales rep productivity.
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The Company accelerated its pace of investment in advanced set-top
boxes, cable modems capable of supporting TWC Maxx speeds, expanded
VOD capacity and network reliability.
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 second quarter of 2014 increased 3.2% year over
year as a result of revenue growth at all segments.
Adjusted Operating Income before Depreciation and Amortization
("Adjusted OIBDA") for the second quarter of 2014 increased
0.8% driven by revenue growth, partially offset by a 4.5% year-over-year
increase in operating expenses.
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(in millions; unaudited)
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2nd Quarter
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Year-to-Date 6/30
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Change
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Change
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2014
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2013
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$
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%
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2014
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2013
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$
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%
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Operating costs and expenses:
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Programming and content
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$
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1,341
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$
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1,234
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$
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107
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8.7
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%
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$
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2,650
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$
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2,509
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$
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141
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5.6
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%
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Sales and marketing
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544
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496
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48
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9.7
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%
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1,099
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969
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130
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13.4
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%
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Technical operations
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371
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363
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8
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2.2
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%
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742
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735
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7
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1.0
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%
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Customer care
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207
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187
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20
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10.7
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%
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412
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384
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28
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7.3
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%
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Other operating
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1,209
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1,233
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(24
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(1.9
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%)
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2,371
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2,479
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(108
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(4.4
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%)
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Total operating costs and expenses
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$
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3,672
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$
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3,513
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$
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159
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4.5
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%
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$
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7,274
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$
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7,076
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$
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198
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2.8
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%
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The increase in operating expenses was primarily due to the following
(each of which is discussed further below under "Detailed Segment
Results"):
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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;
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higher third-party programming costs at the Residential Services
segment;
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growth in sales and marketing costs at the Business Services and
Residential Services segments;
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higher customer care costs at the Residential Services segment; and
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growth in costs associated with advertising inventory sold on behalf
of other video distributors at the Other Operations segment;
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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 $27
million decrease in pension expense.
Operating Income for the second quarter of 2014 decreased 2.0%
primarily due to higher merger-related and restructuring costs,
partially offset by higher Adjusted OIBDA. Merger-related and
restructuring costs for the second quarter of 2014 included Comcast
merger-related costs of $49 million (employee retention costs of $40
million and advisory and legal fees of $9 million), DukeNet
Communications merger-related costs of $3 million and restructuring
costs primarily associated with employee terminations and other exit
costs of $9 million.
DETAILED SEGMENT RESULTS
Residential Services
Residential Services revenue increased as a result of an increase in
high-speed data revenue, partially offset by decreases in video and
voice revenue.
-
Residential video revenue decreased primarily due to a year-over-year
decline in video subscribers, partially offset by an increase in
average revenue per subscriber as a result of price increases.
-
The growth in residential high-speed data revenue was the result of an
increase in average revenue per subscriber, primarily due to increases
in prices and equipment rental charges and a greater percentage of
subscribers purchasing higher-priced tiers of service, as well as
growth in high-speed data subscribers.
-
Residential voice revenue decreased due to lower average revenue per
subscriber.
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Selected Residential Services Financial Results
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(in millions; unaudited)
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2nd Quarter
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Year-to-Date 6/30
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Change
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Change
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2014
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|
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2013
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|
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$
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|
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%
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2014
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|
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2013
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|
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$
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%
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Revenue:
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Video
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$
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2,546
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$
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2,674
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$
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(128
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)
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(4.8
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%)
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$
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5,041
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$
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5,345
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$
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(304
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)
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(5.7
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%)
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High-speed data
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1,606
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1,424
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182
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12.8
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%
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3,164
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2,830
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334
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11.8
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%
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Voice
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490
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517
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(27
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(5.2
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%)
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986
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1,036
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(50
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(4.8
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%)
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Other
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20
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17
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3
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17.6
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%
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39
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32
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7
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21.9
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%
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Total revenue
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$
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4,662
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$
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4,632
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$
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30
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0.6
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%
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$
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9,230
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$
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9,243
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$
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(13
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(0.1
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%)
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Adjusted OIBDA(a)
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$
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2,192
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$
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2,200
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$
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(8
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)
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(0.4
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%)
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|
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$
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4,324
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|
|
$
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4,371
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$
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(47
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)
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(1.1
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%)
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(a)
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Refer to Note 4 to the accompanying consolidated financial
statements for a definition of Adjusted OIBDA.
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The slight decrease in Adjusted OIBDA was driven by a 1.6% increase in
operating costs, partially offset by the increase in revenue discussed
above. The increase in operating costs was the result of increases in
programming costs, sales and marketing costs and customer care 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 3.9% 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 10.8% year over year to $38.29 for
the second quarter of 2014, primarily driven by contractual rate
increases and the carriage of SportsNet LA.
-
Sales and marketing costs increased 5.4% to $353 million primarily due
to headcount growth and higher compensation costs per employee,
including customer retention.
-
Customer care costs increased 9.4% to $174 million primarily due to
higher employee costs.
-
Other operating costs decreased 15.9% to $217 million primarily due to
declines in voice costs, partially offset by higher bad debt expense.
Voice costs decreased $63 million primarily due to the in-sourcing of
voice transport, switching and interconnection services.
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Residential Services Subscriber Metrics
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(in thousands)
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Net
|
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|
|
|
|
|
|
|
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Additions
|
|
|
|
|
|
|
|
3/31/2014
|
|
|
(Declines)(a)
|
|
|
6/30/2014
|
Video
|
|
|
|
11,163
|
|
|
|
(152
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)
|
|
|
|
11,011
|
High-speed data
|
|
|
|
11,358
|
|
|
|
67
|
|
|
|
|
11,415
|
Voice
|
|
|
|
4,913
|
|
|
|
79
|
|
|
|
|
4,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single play
|
|
|
|
5,695
|
|
|
|
(20
|
)
|
|
|
|
5,656
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Double play
|
|
|
|
4,772
|
|
|
|
(56
|
)
|
|
|
|
4,712
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Triple play
|
|
|
|
4,065
|
|
|
|
42
|
|
|
|
|
4,107
|
Customer relationships
|
|
|
|
14,532
|
|
|
|
(34
|
)
|
|
|
|
14,475
|
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.
|
(a)
|
|
During the second quarter of 2014, the Company recorded adjustments
related to the treatment of employee accounts that decreased
residential high-speed data subscribers by 10,000, residential voice
subscribers by 17,000, residential single play subscribers by
19,000, residential double play subscribers by 4,000 and residential
customer relationships by 23,000. The adjustments are reflected in
the Company's subscriber numbers as of June 30, 2014; however, they
are not reflected in net additions (declines) for the second quarter
of 2014.
|
|
|
|
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)
|
|
|
2nd Quarter
|
|
|
Year-to-Date 6/30
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Video
|
|
|
$
|
90
|
|
|
$
|
87
|
|
|
$
|
3
|
|
|
3.4
|
%
|
|
|
$
|
179
|
|
|
$
|
171
|
|
|
$
|
8
|
|
|
4.7
|
%
|
High-speed data
|
|
|
|
331
|
|
|
|
268
|
|
|
|
63
|
|
|
23.5
|
%
|
|
|
|
637
|
|
|
|
524
|
|
|
|
113
|
|
|
21.6
|
%
|
Voice
|
|
|
|
123
|
|
|
|
102
|
|
|
|
21
|
|
|
20.6
|
%
|
|
|
|
241
|
|
|
|
198
|
|
|
|
43
|
|
|
21.7
|
%
|
Wholesale transport
|
|
|
|
97
|
|
|
|
61
|
|
|
|
36
|
|
|
59.0
|
%
|
|
|
|
198
|
|
|
|
116
|
|
|
|
82
|
|
|
70.7
|
%
|
Other
|
|
|
|
50
|
|
|
|
47
|
|
|
|
3
|
|
|
6.4
|
%
|
|
|
|
104
|
|
|
|
93
|
|
|
|
11
|
|
|
11.8
|
%
|
Total revenue
|
|
|
$
|
691
|
|
|
$
|
565
|
|
|
$
|
126
|
|
|
22.3
|
%
|
|
|
$
|
1,359
|
|
|
$
|
1,102
|
|
|
$
|
257
|
|
|
23.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA(a)
|
|
|
$
|
409
|
|
|
$
|
326
|
|
|
$
|
83
|
|
|
25.5
|
%
|
|
|
$
|
811
|
|
|
$
|
638
|
|
|
$
|
173
|
|
|
27.1
|
%
|
(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 an 18.0% increase in operating costs, primarily as a
result of an increase in sales and marketing costs due to increased
headcount and higher compensation costs per employee, as well as costs
associated with DukeNet. This increase was 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
|
|
|
|
|
|
|
|
3/31/2014
|
|
|
Additions
|
|
|
6/30/2014
|
Video
|
|
|
|
196
|
|
|
|
5
|
|
|
|
201
|
High-speed data
|
|
|
|
531
|
|
|
|
19
|
|
|
|
550
|
Voice
|
|
|
|
289
|
|
|
|
13
|
|
|
|
302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single play
|
|
|
|
328
|
|
|
|
8
|
|
|
|
336
|
Double play
|
|
|
|
239
|
|
|
|
10
|
|
|
|
249
|
Triple play
|
|
|
|
70
|
|
|
|
3
|
|
|
|
73
|
Customer relationships
|
|
|
|
637
|
|
|
|
21
|
|
|
|
658
|
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. 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)
|
|
2nd Quarter
|
|
|
Year-to-Date 6/30
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
%
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
%
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
$
|
272
|
|
|
$
|
260
|
|
|
$
|
12
|
|
|
4.6
|
%
|
|
|
$
|
519
|
|
|
$
|
488
|
|
|
$
|
31
|
|
|
6.4
|
%
|
Other
|
|
|
164
|
|
|
|
143
|
|
|
|
21
|
|
|
14.7
|
%
|
|
|
|
317
|
|
|
|
292
|
|
|
|
25
|
|
|
8.6
|
%
|
Total revenue
|
|
$
|
436
|
|
|
$
|
403
|
|
|
$
|
33
|
|
|
8.2
|
%
|
|
|
$
|
836
|
|
|
$
|
780
|
|
|
$
|
56
|
|
|
7.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA(a)
|
|
$
|
173
|
|
|
$
|
234
|
|
|
$
|
(61
|
)
|
|
(26.1
|
%)
|
|
|
$
|
346
|
|
|
$
|
399
|
|
|
$
|
(53
|
)
|
|
(13.3
|
%)
|
(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 55.6% 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 decreased 0.4% year over
year to $720 million for the second quarter of 2014. This decrease was
driven 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
second quarter of 2014 compared to $481 million, or $1.65 per basic
common share and $1.64 per diluted common share, for the second 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 $536 million and
$1.89, respectively, for the second quarter of 2014 compared to $497
million and $1.69, respectively, for the second quarter of 2013.
Adjusted Diluted EPS for the second 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, which was
suspended in connection with the announcement of the Company's merger
with Comcast.
|
|
(in millions, except per share data;
|
|
2nd Quarter
|
|
|
Year-to-Date 6/30
|
unaudited)
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
Net income attributable to TWC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
$
|
499
|
|
|
$
|
481
|
|
|
$
|
18
|
|
|
3.7
|
%
|
|
|
$
|
978
|
|
|
$
|
882
|
|
|
$
|
96
|
|
|
10.9
|
%
|
Adjusted net income attributable to TWC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders(a)
|
|
$
|
536
|
|
|
$
|
497
|
|
|
$
|
39
|
|
|
7.8
|
%
|
|
|
$
|
1,039
|
|
|
$
|
920
|
|
|
$
|
119
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to TWC common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.77
|
|
|
$
|
1.65
|
|
|
$
|
0.12
|
|
|
7.3
|
%
|
|
|
$
|
3.48
|
|
|
$
|
3.00
|
|
|
$
|
0.48
|
|
|
16.0
|
%
|
Diluted
|
|
$
|
1.76
|
|
|
$
|
1.64
|
|
|
$
|
0.12
|
|
|
7.3
|
%
|
|
|
$
|
3.46
|
|
|
$
|
2.98
|
|
|
$
|
0.48
|
|
|
16.1
|
%
|
Adjusted Diluted EPS(a)
|
|
$
|
1.89
|
|
|
$
|
1.69
|
|
|
$
|
0.20
|
|
|
11.8
|
%
|
|
|
$
|
3.68
|
|
|
$
|
3.10
|
|
|
$
|
0.58
|
|
|
18.7
|
%
|
(a)
|
|
Refer to Note 4 to the accompanying consolidated financial
statements for a definition 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 six months of 2014 decreased 21.9%
to $1.1 billion from $1.4 billion in the first six 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 $2.1 billion for the first six
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 six months of 2014 was $3.1
billion, a 5.0% increase from the first six 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)
|
|
2nd Quarter
|
|
|
Year-to-Date 6/30
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
Adjusted OIBDA(a)
|
|
$
|
2,054
|
|
|
|
$
|
2,037
|
|
|
|
$
|
17
|
|
|
|
0.8
|
%
|
|
|
$
|
4,034
|
|
|
|
$
|
3,949
|
|
|
|
$
|
85
|
|
|
|
2.2
|
%
|
Interest payments, net
|
|
|
(330
|
)
|
|
|
|
(345
|
)
|
|
|
|
15
|
|
|
|
(4.3
|
%)
|
|
|
(745
|
)
|
|
|
(802
|
)
|
|
|
|
57
|
|
|
|
(7.1
|
%)
|
Income tax payments, net
|
|
|
(97
|
)
|
|
|
|
(173
|
)
|
|
|
|
76
|
|
|
|
(43.9
|
%)
|
|
|
(95
|
)
|
|
|
(190
|
)
|
|
|
|
95
|
|
(50.0
|
%)
|
All other, net, including working capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
changes(b)
|
|
|
68
|
|
|
|
|
32
|
|
|
|
|
36
|
|
112.5
|
%
|
|
|
|
(102
|
)
|
|
|
|
(12
|
)
|
|
|
|
(90
|
)
|
NM
|
|
Cash provided by operating activities(b)
|
|
|
1,695
|
|
|
|
|
1,551
|
|
|
|
|
144
|
|
|
|
9.3
|
%
|
|
|
|
3,092
|
|
|
|
|
2,945
|
|
|
|
|
147
|
|
|
|
5.0
|
%
|
Add: Excess tax benefit from exercise of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock options
|
|
|
21
|
|
|
|
|
17
|
|
|
|
|
4
|
|
|
|
23.5
|
%
|
|
|
|
99
|
|
|
|
|
66
|
|
|
|
|
33
|
|
|
|
50.0
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(1,240
|
)
|
|
|
|
(827
|
)
|
|
|
|
(413
|
)
|
|
|
49.9
|
%
|
|
|
(2,074
|
)
|
|
|
(1,597
|
)
|
|
|
|
(477
|
)
|
|
|
29.9
|
%
|
Cash paid for other intangible assets
|
|
|
(12
|
)
|
|
|
|
(8
|
)
|
|
|
|
(4
|
)
|
|
|
50.0
|
%
|
|
|
|
(24
|
)
|
|
|
|
(20
|
)
|
|
|
|
(4
|
)
|
|
|
20.0
|
%
|
Other
|
|
|
(5
|
)
|
|
|
|
(1
|
)
|
|
|
|
(4
|
)
|
|
|
400.0
|
%
|
|
|
|
(5
|
)
|
|
|
|
(1
|
)
|
|
|
|
(4
|
)
|
|
|
400.0
|
%
|
Free Cash Flow(a)(b)
|
|
|
459
|
|
|
|
|
732
|
|
|
|
|
(273
|
)
|
|
|
(37.3
|
%)
|
|
|
|
1,088
|
|
|
|
|
1,393
|
|
|
|
|
(305
|
)
|
|
|
(21.9
|
%)
|
Economic Stimulus Act impacts(c)
|
|
|
195
|
|
|
|
|
39
|
|
|
|
|
156
|
|
400.0
|
%
|
|
|
|
195
|
|
|
|
|
39
|
|
|
|
|
156
|
|
400.0
|
%
|
Free Cash Flow excluding Economic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stimulus Act impacts
|
|
$
|
654
|
|
|
|
$
|
771
|
|
|
|
$
|
(117
|
)
|
|
|
(15.2
|
%)
|
|
|
$
|
1,283
|
|
|
|
$
|
1,432
|
|
|
|
$
|
(149
|
)
|
|
|
(10.4
|
%)
|
NM-Not meaningful.
|
(a)
|
|
Refer to Note 4 to the accompanying consolidated financial
statements for a definition of Adjusted OIBDA and Free Cash Flow.
|
(b)
|
|
All other, net, including working capital changes includes
merger-related and restructuring payments of $29 million and $35
million for the second quarters of 2014 and 2013, respectively, and
$87 million and $64 million for the six months ended June 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 $24.2 billion as of June 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 connection with the announcement of
the Company's merger with Comcast).
|
|
(in millions; unaudited)
|
|
|
6/30/2014
|
|
|
12/31/2013
|
Long-term debt
|
|
|
$
|
22,917
|
|
|
|
$
|
23,285
|
|
Debt due within one year
|
|
|
|
1,663
|
|
|
|
|
1,767
|
|
Total debt
|
|
|
|
24,580
|
|
|
|
|
25,052
|
|
Cash and equivalents
|
|
|
|
(403
|
)
|
|
|
|
(525
|
)
|
Net debt(a)
|
|
|
$
|
24,177
|
|
|
|
$
|
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, July 31, 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.
|
TIME WARNER CABLE INC.
|
CONSOLIDATED BALANCE SHEET
|
(Unaudited)
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
2014
|
|
|
2013
|
|
|
(in millions)
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
403
|
|
|
|
$
|
525
|
|
Receivables, less allowances of $131 million and $77 million as of
June 30, 2014 and December 31, 2013, respectively
|
|
|
906
|
|
|
|
|
954
|
|
Deferred income tax assets
|
|
|
348
|
|
|
|
|
334
|
|
Other current assets
|
|
|
331
|
|
|
|
|
331
|
|
Total current assets
|
|
|
1,988
|
|
|
|
|
2,144
|
|
Investments
|
|
|
68
|
|
|
|
|
56
|
|
Property, plant and equipment, net
|
|
|
15,604
|
|
|
|
|
15,056
|
|
Intangible assets subject to amortization, net
|
|
|
576
|
|
|
|
|
552
|
|
Intangible assets not subject to amortization
|
|
|
26,012
|
|
|
|
|
26,012
|
|
Goodwill
|
|
|
3,137
|
|
|
|
|
3,196
|
|
Other assets
|
|
|
1,071
|
|
|
|
|
1,257
|
|
Total assets
|
|
$
|
48,456
|
|
|
|
$
|
48,273
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
565
|
|
|
|
$
|
565
|
|
Deferred revenue and subscriber-related liabilities
|
|
|
195
|
|
|
|
|
188
|
|
Accrued programming and content expense
|
|
|
895
|
|
|
|
|
869
|
|
Current maturities of long-term debt
|
|
|
1,663
|
|
|
|
|
1,767
|
|
Other current liabilities
|
|
|
1,956
|
|
|
|
|
1,837
|
|
Total current liabilities
|
|
|
5,274
|
|
|
|
|
5,226
|
|
Long-term debt
|
|
|
22,917
|
|
|
|
|
23,285
|
|
Deferred income tax liabilities, net
|
|
|
12,162
|
|
|
|
|
12,098
|
|
Other liabilities
|
|
|
689
|
|
|
|
|
717
|
|
TWC shareholders' equity:
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 279.3 million and 277.9 million
shares issued and outstanding as of June 30, 2014 and December 31,
2013, respectively
|
|
|
3
|
|
|
|
|
3
|
|
Additional paid-in capital
|
|
|
6,940
|
|
|
|
|
6,951
|
|
Retained earnings (accumulated deficit)
|
|
|
539
|
|
|
|
|
(55
|
)
|
Accumulated other comprehensive income (loss), net
|
|
|
(72
|
)
|
|
|
|
44
|
|
Total TWC shareholders' equity
|
|
|
7,410
|
|
|
|
|
6,943
|
|
Noncontrolling interests
|
|
|
4
|
|
|
|
|
4
|
|
Total equity
|
|
|
7,414
|
|
|
|
|
6,947
|
|
Total liabilities and equity
|
|
$
|
48,456
|
|
|
|
$
|
48,273
|
|
|
See accompanying notes.
|
|
|
TIME WARNER CABLE INC.
|
CONSOLIDATED STATEMENT OF OPERATIONS
|
(Unaudited)
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
June 30,
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
(recast)
|
|
|
|
|
|
|
(recast)
|
|
|
(in millions, except per share data)
|
Revenue
|
|
$
|
5,726
|
|
|
|
$
|
5,550
|
|
|
|
$
|
11,308
|
|
|
|
$
|
11,025
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and content
|
|
|
1,341
|
|
|
|
|
1,234
|
|
|
|
|
2,650
|
|
|
|
|
2,509
|
|
Sales and marketing
|
|
|
544
|
|
|
|
|
496
|
|
|
|
|
1,099
|
|
|
|
|
969
|
|
Technical operations
|
|
|
371
|
|
|
|
|
363
|
|
|
|
|
742
|
|
|
|
|
735
|
|
Customer care
|
|
|
207
|
|
|
|
|
187
|
|
|
|
|
412
|
|
|
|
|
384
|
|
Other operating
|
|
|
1,209
|
|
|
|
|
1,233
|
|
|
|
|
2,371
|
|
|
|
|
2,479
|
|
Depreciation
|
|
|
795
|
|
|
|
|
792
|
|
|
|
|
1,570
|
|
|
|
|
1,581
|
|
Amortization
|
|
|
35
|
|
|
|
|
31
|
|
|
|
|
68
|
|
|
|
|
63
|
|
Merger-related and restructuring costs
|
|
|
61
|
|
|
|
|
27
|
|
|
|
|
141
|
|
|
|
|
58
|
|
Total costs and expenses
|
|
|
4,563
|
|
|
|
|
4,363
|
|
|
|
|
9,053
|
|
|
|
|
8,778
|
|
Operating Income
|
|
|
1,163
|
|
|
|
|
1,187
|
|
|
|
|
2,255
|
|
|
|
|
2,247
|
|
Interest expense, net
|
|
|
(349
|
)
|
|
|
|
(398
|
)
|
|
|
|
(713
|
)
|
|
|
|
(796
|
)
|
Other income, net
|
|
|
8
|
|
|
|
|
11
|
|
|
|
|
23
|
|
|
|
|
10
|
|
Income before income taxes
|
|
|
822
|
|
|
|
|
800
|
|
|
|
|
1,565
|
|
|
|
|
1,461
|
|
Income tax provision
|
|
|
(323
|
)
|
|
|
|
(319
|
)
|
|
|
|
(587
|
)
|
|
|
|
(579
|
)
|
Net income
|
|
|
499
|
|
|
|
|
481
|
|
|
|
|
978
|
|
|
|
|
882
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Net income attributable to TWC shareholders
|
|
$
|
499
|
|
|
|
$
|
481
|
|
|
|
$
|
978
|
|
|
|
$
|
882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWC common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.77
|
|
|
|
$
|
1.65
|
|
|
|
$
|
3.48
|
|
|
|
$
|
3.00
|
|
Diluted
|
|
$
|
1.76
|
|
|
|
$
|
1.64
|
|
|
|
$
|
3.46
|
|
|
|
$
|
2.98
|
|
Average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
278.8
|
|
|
|
|
289.6
|
|
|
|
|
278.3
|
|
|
|
|
292.4
|
|
Diluted
|
|
|
282.4
|
|
|
|
|
293.3
|
|
|
|
|
282.1
|
|
|
|
|
296.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share of common stock
|
|
$
|
0.75
|
|
|
|
$
|
0.65
|
|
|
|
$
|
1.50
|
|
|
|
$
|
1.30
|
|
|
See accompanying notes.
|
|
|
TIME WARNER CABLE INC.
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(Unaudited)
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
2014
|
|
|
2013
|
|
|
(in millions)
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net income
|
|
$
|
978
|
|
|
|
$
|
882
|
|
Adjustments for noncash and nonoperating items:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,570
|
|
|
|
|
1,581
|
|
Amortization
|
|
|
68
|
|
|
|
|
63
|
|
Income from equity-method investments, net of cash distributions
|
|
|
(16
|
)
|
|
|
|
(9
|
)
|
Deferred income taxes
|
|
|
123
|
|
|
|
|
224
|
|
Equity-based compensation expense
|
|
|
93
|
|
|
|
|
74
|
|
Excess tax benefit from equity-based compensation
|
|
|
(99
|
)
|
|
|
|
(66
|
)
|
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
|
|
|
|
|
|
|
|
Receivables
|
|
|
41
|
|
|
|
|
30
|
|
Accounts payable and other liabilities
|
|
|
326
|
|
|
|
|
138
|
|
Other changes
|
|
|
8
|
|
|
|
|
28
|
|
Cash provided by operating activities
|
|
|
3,092
|
|
|
|
|
2,945
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(2,074
|
)
|
|
|
|
(1,597
|
)
|
Purchases of investments
|
|
|
(2
|
)
|
|
|
|
(581
|
)
|
Return of capital from investees
|
|
|
-
|
|
|
|
|
7
|
|
Proceeds from sale, maturity and collection of investments
|
|
|
18
|
|
|
|
|
151
|
|
Acquisition of intangible assets
|
|
|
(24
|
)
|
|
|
|
(20
|
)
|
Other investing activities
|
|
|
15
|
|
|
|
|
13
|
|
Cash used by investing activities
|
|
|
(2,067
|
)
|
|
|
|
(2,027
|
)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Short-term borrowings, net
|
|
|
1,147
|
|
|
|
|
-
|
|
Repayments of long-term debt
|
|
|
(1,750
|
)
|
|
|
|
-
|
|
Dividends paid
|
|
|
(428
|
)
|
|
|
|
(386
|
)
|
Repurchases of common stock
|
|
|
(259
|
)
|
|
|
|
(1,304
|
)
|
Proceeds from exercise of stock options
|
|
|
118
|
|
|
|
|
88
|
|
Excess tax benefit from equity-based compensation
|
|
|
99
|
|
|
|
|
66
|
|
Taxes paid in cash in lieu of shares issued for equity-based
compensation
|
|
|
(68
|
)
|
|
|
|
(55
|
)
|
Other financing activities
|
|
|
(6
|
)
|
|
|
|
(8
|
)
|
Cash used by financing activities
|
|
|
(1,147
|
)
|
|
|
|
(1,599
|
)
|
|
|
|
|
|
|
|
|
Decrease in cash and equivalents
|
|
|
(122
|
)
|
|
|
|
(681
|
)
|
Cash and equivalents at beginning of period
|
|
|
525
|
|
|
|
|
3,304
|
|
Cash and equivalents at end of period
|
|
$
|
403
|
|
|
|
$
|
2,623
|
|
|
See accompanying notes.
|
|
TIME WARNER CABLE INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited)
1. COMCAST MERGER
On February 12, 2014, Time Warner Cable Inc. ("TWC" or the "Company")
entered into an Agreement and Plan of Merger 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.
Merger integration planning is underway, with the Company and Comcast
working toward a closing by year-end 2014, subject to receipt of
shareholder and 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 six months ended June 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)
|
2nd Quarter 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
1,993
|
|
|
|
$
|
(830
|
)
|
|
|
$
|
1,163
|
|
|
|
$
|
(341
|
)
|
|
|
$
|
(323
|
)
|
|
|
$
|
499
|
|
|
|
$
|
1.76
|
|
Year-over-year change, as reported:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
$
|
(17
|
)
|
|
|
$
|
(7
|
)
|
|
|
$
|
(24
|
)
|
|
|
$
|
46
|
|
|
|
$
|
(4
|
)
|
|
|
$
|
18
|
|
|
|
$
|
0.12
|
|
%
|
|
(0.8
|
%)
|
|
|
0.9
|
%
|
|
|
(2.0
|
%)
|
|
|
(11.9
|
%)
|
|
|
1.3
|
%
|
|
|
3.7
|
%
|
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
61
|
|
|
|
|
-
|
|
|
|
|
61
|
|
|
|
|
-
|
|
|
|
|
(24
|
)
|
|
|
|
37
|
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
$
|
2,054
|
|
|
|
$
|
(830
|
)
|
|
|
$
|
1,224
|
|
|
|
$
|
(341
|
)
|
|
|
$
|
(347
|
)
|
|
|
$
|
536
|
|
|
|
$
|
1.89
|
|
Year-over-year change, as adjusted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
$
|
17
|
|
|
|
$
|
(7
|
)
|
|
|
$
|
10
|
|
|
|
$
|
46
|
|
|
|
$
|
(17
|
)
|
|
|
$
|
39
|
|
|
|
$
|
0.20
|
|
%
|
|
0.8
|
%
|
|
|
0.9
|
%
|
|
|
0.8
|
%
|
|
|
(11.9
|
%)
|
|
|
5.2
|
%
|
|
|
7.8
|
%
|
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2nd Quarter 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
2,010
|
|
|
|
$
|
(823
|
)
|
|
|
$
|
1,187
|
|
|
|
$
|
(387
|
)
|
|
|
$
|
(319
|
)
|
|
|
$
|
481
|
|
|
|
$
|
1.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
27
|
|
|
|
|
-
|
|
|
|
|
27
|
|
|
|
|
-
|
|
|
|
|
(11
|
)
|
|
|
|
16
|
|
|
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
$
|
2,037
|
|
|
|
$
|
(823
|
)
|
|
|
$
|
1,214
|
|
|
|
$
|
(387
|
)
|
|
|
$
|
(330
|
)
|
|
|
$
|
497
|
|
|
|
$
|
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.
|
|
|
(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 6/30/2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
3,893
|
|
|
|
$
|
(1,638
|
)
|
|
|
$
|
2,255
|
|
|
|
$
|
(690
|
)
|
|
|
$
|
(587
|
)
|
|
|
$
|
978
|
|
|
|
$
|
3.46
|
|
Year-over-year change, as reported:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
$
|
2
|
|
|
|
$
|
6
|
|
|
|
$
|
8
|
|
|
|
$
|
96
|
|
|
|
$
|
(8
|
)
|
|
|
$
|
96
|
|
|
|
$
|
0.48
|
|
%
|
|
0.1
|
%
|
|
|
(0.4
|
%)
|
|
|
0.4
|
%
|
|
|
(12.2
|
%)
|
|
|
1.4
|
%
|
|
|
10.9
|
%
|
|
|
16.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
141
|
|
|
|
|
-
|
|
|
|
|
141
|
|
|
|
|
-
|
|
|
|
|
(55
|
)
|
|
|
|
86
|
|
|
|
|
0.31
|
|
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
|
|
$
|
4,034
|
|
|
|
$
|
(1,638
|
)
|
|
|
$
|
2,396
|
|
|
|
$
|
(691
|
)
|
|
|
$
|
(666
|
)
|
|
|
$
|
1,039
|
|
|
|
$
|
3.68
|
|
Year-over-year change, as adjusted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
$
|
85
|
|
|
|
$
|
6
|
|
|
|
$
|
91
|
|
|
|
$
|
90
|
|
|
|
$
|
(62
|
)
|
|
|
$
|
119
|
|
|
|
$
|
0.58
|
|
%
|
|
2.2
|
%
|
|
|
(0.4
|
%)
|
|
|
3.9
|
%
|
|
|
(11.5
|
%)
|
|
|
10.3
|
%
|
|
|
12.9
|
%
|
|
|
18.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date 6/30/2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
3,891
|
|
|
|
$
|
(1,644
|
)
|
|
|
$
|
2,247
|
|
|
|
$
|
(786
|
)
|
|
|
$
|
(579
|
)
|
|
|
$
|
882
|
|
|
|
$
|
2.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
58
|
|
|
|
|
-
|
|
|
|
|
58
|
|
|
|
|
-
|
|
|
|
|
(23
|
)
|
|
|
|
35
|
|
|
|
|
0.11
|
|
Loss on equity award reimbursement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligation to Time Warner(b)
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
5
|
|
|
|
|
(2
|
)
|
|
|
|
3
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
$
|
3,949
|
|
|
|
$
|
(1,644
|
)
|
|
|
$
|
2,305
|
|
|
|
$
|
(781
|
)
|
|
|
$
|
(604
|
)
|
|
|
$
|
920
|
|
|
|
$
|
3.10
|
|
_________________
|
(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 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.
|
|
3. RECONCILIATION OF ADJUSTED OIBDA TO OPERATING INCOME AND
OTHER SEGMENT INFORMATION
Consolidated information for the three and six months ended June 30,
2014 and 2013 is as follows:
|
(in millions)
|
|
2nd Quarter
|
|
|
Year-to-Date 6/30
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
Adjusted OIBDA(a)
|
|
$
|
2,054
|
|
|
|
$
|
2,037
|
|
|
|
$
|
17
|
|
|
|
0.8
|
%
|
|
|
$
|
4,034
|
|
|
|
$
|
3,949
|
|
|
|
$
|
85
|
|
|
|
2.2
|
%
|
Adjusted OIBDA margin(b)
|
|
35.9
|
%
|
|
|
36.7
|
%
|
|
|
|
|
|
|
|
|
35.7
|
%
|
|
|
35.8
|
%
|
|
|
|
|
|
|
Merger-related and restructuring costs
|
|
|
(61
|
)
|
|
|
|
(27
|
)
|
|
|
|
(34
|
)
|
|
|
125.9
|
%
|
|
|
|
(141
|
)
|
|
|
|
(58
|
)
|
|
|
|
(83
|
)
|
|
|
143.1
|
%
|
OIBDA(a)
|
|
|
1,993
|
|
|
|
|
2,010
|
|
|
|
|
(17
|
)
|
|
|
(0.8
|
%)
|
|
|
3,893
|
|
|
|
3,891
|
|
|
|
|
2
|
|
|
|
0.1
|
%
|
Depreciation
|
|
|
(795
|
)
|
|
|
|
(792
|
)
|
|
|
|
(3
|
)
|
|
|
0.4
|
%
|
|
|
(1,570
|
)
|
|
|
(1,581
|
)
|
|
|
|
11
|
|
|
|
(0.7
|
%)
|
Amortization
|
|
|
(35
|
)
|
|
|
|
(31
|
)
|
|
|
|
(4
|
)
|
|
|
12.9
|
%
|
|
|
(68
|
)
|
|
|
(63
|
)
|
|
|
|
(5
|
)
|
|
|
7.9
|
%
|
Operating Income
|
|
$
|
1,163
|
|
|
|
$
|
1,187
|
|
|
|
$
|
(24
|
)
|
|
|
(2.0
|
%)
|
|
|
$
|
2,255
|
|
|
|
$
|
2,247
|
|
|
|
$
|
8
|
|
|
|
0.4
|
%
|
________________
|
(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 revenues 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 six months ended June 30, 2014 and
2013 is as follows:
|
|
|
(in millions)
|
|
2nd Quarter 2014
|
|
|
Residential
|
|
|
Business
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Services
|
|
|
Operations
|
|
|
Shared
|
|
|
Intersegment
|
|
|
Total
|
|
|
Segment
|
|
|
Segment
|
|
|
Segment
|
|
|
Functions
|
|
|
Eliminations
|
|
|
Consolidated
|
Revenue(a)
|
|
$
|
4,662
|
|
|
|
$
|
691
|
|
|
|
$
|
436
|
|
|
|
$
|
-
|
|
|
|
$
|
(63
|
)
|
|
|
$
|
5,726
|
|
Operating costs and expenses
|
|
|
(2,470
|
)
|
|
|
|
(282
|
)
|
|
|
|
(263
|
)
|
|
|
|
(720
|
)
|
|
|
|
63
|
|
|
|
|
(3,672
|
)
|
Adjusted OIBDA(b)
|
|
|
2,192
|
|
|
|
|
409
|
|
|
|
|
173
|
|
|
|
|
(720
|
)
|
|
|
|
-
|
|
|
|
|
2,054
|
|
Merger-related and restructuring costs
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(61
|
)
|
|
|
|
-
|
|
|
|
|
(61
|
)
|
OIBDA(b)
|
|
$
|
2,192
|
|
|
|
$
|
409
|
|
|
|
$
|
173
|
|
|
|
$
|
(781
|
)
|
|
|
$
|
-
|
|
|
|
|
1,993
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(795
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35
|
)
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,163
|
|
__________________
|
(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)
|
|
2nd Quarter 2013
|
|
|
Residential
|
|
|
Business
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Services
|
|
|
Operations
|
|
|
Shared
|
|
|
Intersegment
|
|
|
Total
|
|
|
Segment
|
|
|
Segment
|
|
|
Segment
|
|
|
Functions
|
|
|
Eliminations
|
|
|
Consolidated
|
Revenue(a)
|
|
$
|
4,632
|
|
|
|
$
|
565
|
|
|
|
$
|
403
|
|
|
|
$
|
-
|
|
|
|
$
|
(50
|
)
|
|
|
$
|
5,550
|
|
Operating costs and expenses
|
|
|
(2,432
|
)
|
|
|
|
(239
|
)
|
|
|
|
(169
|
)
|
|
|
|
(723
|
)
|
|
|
|
50
|
|
|
|
|
(3,513
|
)
|
Adjusted OIBDA(b)
|
|
|
2,200
|
|
|
|
|
326
|
|
|
|
|
234
|
|
|
|
|
(723
|
)
|
|
|
|
-
|
|
|
|
|
2,037
|
|
Merger-related and restructuring costs
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(27
|
)
|
|
|
|
-
|
|
|
|
|
(27
|
)
|
OIBDA(b)
|
|
$
|
2,200
|
|
|
|
$
|
326
|
|
|
|
$
|
234
|
|
|
|
$
|
(750
|
)
|
|
|
$
|
-
|
|
|
|
|
2,010
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(792
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,187
|
|
|
|
__________________
|
(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 6/30/2014
|
|
|
Residential
|
|
|
Business
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Services
|
|
|
Operations
|
|
|
Shared
|
|
|
Intersegment
|
|
|
Total
|
|
|
Segment
|
|
|
Segment
|
|
|
Segment
|
|
|
Functions
|
|
|
Eliminations
|
|
|
Consolidated
|
Revenue(a)
|
|
$
|
9,230
|
|
|
|
$
|
1,359
|
|
|
|
$
|
836
|
|
|
|
$
|
-
|
|
|
|
$
|
(117
|
)
|
|
|
$
|
11,308
|
|
Operating costs and expenses
|
|
|
(4,906
|
)
|
|
|
|
(548
|
)
|
|
|
|
(490
|
)
|
|
|
|
(1,447
|
)
|
|
|
|
117
|
|
|
|
|
(7,274
|
)
|
Adjusted OIBDA(b)
|
|
|
4,324
|
|
|
|
|
811
|
|
|
|
|
346
|
|
|
|
|
(1,447
|
)
|
|
|
|
-
|
|
|
|
|
4,034
|
|
Merger-related and restructuring costs
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(141
|
)
|
|
|
|
-
|
|
|
|
|
(141
|
)
|
OIBDA(b)
|
|
$
|
4,324
|
|
|
|
$
|
811
|
|
|
|
$
|
346
|
|
|
|
$
|
(1,588
|
)
|
|
|
$
|
-
|
|
|
|
|
3,893
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,570
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68
|
)
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,255
|
|
__________________
|
(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 6/30/2013
|
|
|
Residential
|
|
|
Business
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Services
|
|
|
Operations
|
|
|
Shared
|
|
|
Intersegment
|
|
|
Total
|
|
|
Segment
|
|
|
Segment
|
|
|
Segment
|
|
|
Functions
|
|
|
Eliminations
|
|
|
Consolidated
|
Revenue(a)
|
|
$
|
9,243
|
|
|
|
$
|
1,102
|
|
|
|
$
|
780
|
|
|
|
$
|
-
|
|
|
|
$
|
(100
|
)
|
|
|
$
|
11,025
|
|
Operating costs and expenses
|
|
|
(4,872
|
)
|
|
|
|
(464
|
)
|
|
|
|
(381
|
)
|
|
|
|
(1,459
|
)
|
|
|
|
100
|
|
|
|
|
(7,076
|
)
|
Adjusted OIBDA(b)
|
|
|
4,371
|
|
|
|
|
638
|
|
|
|
|
399
|
|
|
|
|
(1,459
|
)
|
|
|
|
-
|
|
|
|
|
3,949
|
|
Merger-related and restructuring costs
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(58
|
)
|
|
|
|
-
|
|
|
|
|
(58
|
)
|
OIBDA(b)
|
|
$
|
4,371
|
|
|
|
$
|
638
|
|
|
|
$
|
399
|
|
|
|
$
|
(1,517
|
)
|
|
|
$
|
-
|
|
|
|
|
3,891
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,581
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(63
|
)
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,247
|
|
__________________
|
(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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