Time Warner Cable Inc.
) reported fourth-quarter 2012 financial results, where the
bottom line beat the Zacks Consensus Estimate while the top line
missed the same.
Quarterly adjusted (excluding special items) earnings per share
of $1.57 beat the Zacks Consensus Estimate of $1.56. Quarterly
GAAP net income was $513 million or $1.68 per share against $564
million or $1.75 per share in the prior-year quarter. At $5,485
million, quarterly total revenue fell short of the Zacks
Consensus Estimate of $5,500 million, but was up 9.9% year over
On an annualized basis total revenue increased 8.7% to $21,386
million while adjusted earnings per share increased 22.6% to
$5.75. The outperformance was mainly attributable to improved
advertising sales, strong high-speed data revenue growth and
successful integration of Insight Communications.
Quarterly adjusted operating income before depreciation and
amortization (OIBDA) climbed 5.6% year over year to $1,994
million. GAAP operating income grew 13.6% year over year to
$1,169 million. During the fourth quarter of 2012, Time Warner
Cable repurchased 6.0 million shares for a total consideration of
$571 million and also paid $171 million in dividends.
During the reported quarter, Time Warner Cable generated $1,410
million of cash from operations compared with $1,344 million in
the prior-year period. Free cash flow in the fourth quarter of
2012 was $587 million compared with $391 million in the year-ago
At the end of the fourth quarter of 2012, Time Warner Cable had
$3,454 million in cash and marketable securities compared with
$5,177 million at the end of 2011. Long term debt at the end of
the reported quarter was $25,171 million against $24,320 million
at the end of 2011. At the end of 2012, debt-to-capitalization
ratio was 0.77 compared with 0.76 at the end of 2011.
Residential Services Segment
Quarterly total revenue was $4,577 million, up 6.8% year over
year. Within the segment, video revenue was $2,687 million, up
2.2% year over year. High-speed data revenue was $1,346 million,
up 17.2% year over year. Voice revenue was $527 million, up 6.5%
year over year. Other revenue was $17 million, up 30.8% year over
Business Services Segment
Quarterly revenue was $515 million, up 25.9% year over year.
Within the segment, video revenue was $83 million, up 12.2% year
over year. High-speed data revenue was $245 million, up 25.0%
year over year. Voice revenue was $87 million, up by a
substantial 52.6% year over year. Wholesale transport revenue was
$52 million, up 18.2% year over year. Other revenue was $48
million, up 26.3% year over year.
Advertising revenue surged 29.3% year over year to $313
Other revenue came in at $80 million, up 37.9% year over year.
At the end of 2012, Residential Video subscribers' base was
12.030 million. Time Warner Cable lost 129,000 residential video
subscribers in the previous quarter. Commercial Video
subscribers' base was 188,000. Residential High-speed Data
subscribers' base was 10.935 million. Time Warner Cable added
75,000 residential High-Speed Data subscribers. Commercial
High-speed Data subscribers' base was 460,000. The company also
added 14,000 commercial High-speed Data subscribers. Residential
voice subscribers' base was 5.024 million. Commercial voice
subscribers' base was 224,000. The company added 12,000
commercial voice subscribers.
In the fourth quarter, Time Warner Cable gained 36,000 Triple
play subscribers totaling 4.294 million, lost 34000 Double play
subscribers totaling 5.04 million, and also lost 29,000 Single
play subscribers totaling 5.907 million.
We believe going forward, Time Warner Cable will benefit from the
launch of popular sports channels in the US market. Of late,
sports entertainment has become a lucrative form to earn revenue
for cable MSOs. Time Warner Cable sold the distribution rights to
) U-Verse, thereby aiding its top-line growth. Additionally, the
second largest cable MSO is also planning to hike its rates on
the back of multiple deals signed with different sporting majors
like Los Angeles Galaxy, Los Angeles Sparks, Los Angeles Lakers
and Los Angeles Dodgers. However, loss of its residential video
subscribers remains the primary cause of concern for Time Warner
Cable as customers are opting for cheaper video streaming service
) Hulu.Com and You Tube.
Time Warner Cable currently carries a Zacks Rank #3 (Hold).
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