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Time Warner Cable Inc. (TWC - Analyst Report) reported mixed financial results for the third quarter of 2013. 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 substantially beat the Zacks Consensus Estimate of $1.64. Quarterly GAAP net income was $532 million or $1.84 per share compared with $808 million or $2.60 per share in the prior-year quarter. At $5,518 million, quarterly total revenue fell short of the Zacks Consensus Estimate of $5,542 million, but was up 2.9% year over year.
Quarterly adjusted operating income before depreciation and amortization (OIBDA) grew 3% year over year to $2,005 million. Operating income climbed 6% year over year to $1,160 million. During the third quarter of 2013, Time Warner Cable repurchased 4.8 million shares for $545 million and also paid $187 million in dividends. Average monthly revenue per user rose 2% to $105.
In the reported quarter, Time Warner Cable generated $1,209 million of cash from operations compared with $1,195 million in the prior-year quarter. Free cash flow in the third quarter of 2013 was $440 million as against $423 million in the year-ago quarter.
At the end of the third quarter of 2013, Time Warner Cable had $1,126 million in cash and marketable securities compared with $3,454 million at the end of 2012. Outstanding debt was $25,032 million as against $25,171 million at the end of 2012. At the end of the third quarter of 2013, the debt-to-capitalization ratio was 0.78 as against 0.77 at the end of 2012.
Residential Services Segment
Quarterly total revenue was $4,579 million, up 0.7% year over year. Within the segment, video revenues were $2,600 million, down 4.5% from the prior-year quarter. High-speed data revenues were $1,461 million, up 14.2% year over year. Voice revenues were $498 million, down 6% year over year. Other revenues were $20 million, up 17.6% from the year-ago quarter.
Business Services Segment
Quarterly total revenues were $594 million, up 20.5% year over year. Within the segment, video revenues were $87 million, up 4.8% year over year. High-speed data revenues were $282 million, up 20% year over year. Voice revenues were $110 million, up by a substantial 32.5% from the year-earlier quarter. Wholesale transport revenues were $65 million, up 38.3% year over year. Other revenues were $50 million, up 11.1% year over year.
Advertising revenues dropped 4.2% year over year to $253 million.
Other revenues came in at $92 million, up 58.6% year over year.
Cable TV operators are gradually losing video subscribers to large telecom operators, such as Verizon Communications Inc. (VZ - Analyst Report) and AT&T Inc. (T - Analyst Report) and online video streaming service providers like Netflix Inc. (NFLX - Analyst Report). Time Warner Cable is also facing the brunt of growing competition.
On Sep 30, 2013, Residential Video subscribers’ base was 11.414 million. Time Warner Cable lost 306,000 residential video subscribers in the reported quarter. At the same time, the Commercial Video subscribers’ base was 193,000, indicating a quarterly gain of 2,000 subscribers.
Residential High-speed Data subscribers’ base was 11.050 million. The company lost a net 24,000 residential High-Speed Data subscribers. Commercial High-speed Data subscribers’ base was 500,000. The company also added 15,000 commercial High-speed Data subscribers. Residential voice subscribers’ base was 4.805 million, a quarterly loss of 128,000 subscribers. Commercial voice subscribers’ base was 262,000. Time Warner Cable gained 12,000 commercial voice subscribers in the reported quarter.
In the third quarter of 2013, Time Warner Cable lost 144,000 Triple play subscribers totaling 4.053 million and 24,000 Double play subscribers totaling 5.044 million. However, the company gained 51,000 single-play subscribers totaling 5.978 million.