Time Warner Cable Inc. (TWC) reported its second-quarter 2013 financial results, where the bottom line beat the Zacks Consensus Estimate while the top line missed the same. Importantly, the company lost a significant amount of video and telephony subscribers in the reported quarter. Time Warner Cable currently carries a Zacks Rank #3 (Hold).
Quarterly adjusted (excluding special items) earnings per share of $1.69 beat the Zacks Consensus Estimate of $1.66. Quarterly GAAP net income was $481 million or $1.64 per share compared with $452 million or $1.43 per share in the prior-year quarter. At $5,550 million, quarterly total revenue fell short of the Zacks Consensus Estimate of $5,578 million, but was up 2.7% year over year.
Quarterly adjusted operating income before depreciation and amortization (:OIBDA) grew 1.3% year over year to $2,037 million. Operating income climbed 4.1% year over year to $1,187 million. During the second quarter of 2013, Time Warner Cable repurchased 6.6 million shares for $638 million and also paid $191 million in dividends. Average monthly revenue per user rose 1.2% to $105.21.
During the reported quarter, Time Warner Cable generated $1,551 million of cash from operations compared with $1,537 million in the prior-year quarter. Free cash flow in the second quarter of 2013 was $771 million compared with $875 million in the year-ago quarter.
At the end of the second quarter of 2013, Time Warner Cable had $3,198 million in cash and marketable securities compared with $3,454 million at the end of 2012. Outstanding debt at the end of the reported quarter was $26,392 million compared with $25,171 million at the end of 2012. At the end of the first half of 2013, the debt-to-capitalization ratio was 0.78 compared with 0.77 at the end of 2012.
Residential Services Segment
Quarterly total revenue was $4,632 million, up 0.3% year over year. Within the segment, video revenues were $2,674 million, down 4.4% year over year. High-speed data revenues were $1,424 million, up 12.5% year over year. Voice revenues were $517 million, down 4.1% year over year. Other revenues were $17 million, up 13.3% year over year.
Business Services Segment
Quarterly total revenues were $565 million, up 21.8% year over year. Within the segment, video revenues were $87 million, up 7.4% year over year. High-speed data revenues were $268 million, up 19.6% year over year. Voice revenues were $102 million, up by a substantial 39.7% year over year. Wholesale transport revenues were $61 million, up 38.6% year over year. Other revenues were $47 million, up 11.9% year over year.
Advertising revenues dropped 1.9% year over year to $260 million.
Other revenues came in at $93 million, up 60.3% year over year.
Cable TV operators are gradually losing video subscribers to large telecom operators, such as Verizon Communications Inc. (VZ) and AT&T Inc. (T) and online video streaming service providers like Netflix Inc. (NFLX). Time Warner Cable is also facing the brunt of growing competition.
On Jun 30, 2013, Residential Video subscribers’ base was 11.72 million. Time Warner Cable lost 191,000 residential video subscribers in the reported quarter. At the same time, the Commercial Video subscribers’ base was 191,000, indicating a quarterly gain of 2,000 subscribers. Residential High-speed Data subscribers’ base was 11.074 million.
The company added 8,000 residential High-Speed Data subscribers. Commercial High-speed Data subscribers’ base was 485,000. The company also added 13,000 commercial High-speed Data subscribers.
Residential voice subscribers’ base was 4.933 million, a quarterly loss of 56,000 subscribers. Commercial voice subscribers’ base was 250,000. Time Warner Cable gained 13,000 commercial voice subscribers in the reported quarter.
In the second quarter of 2013, Time Warner Cable lost 62,000 Triple Play subscribers totaling 4.197 million, lost 6,000 Double Play subscribers totaling 5.068 million, and also lost 12,000 Single Play subscribers totaling 5.927 million.
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