Time Warner Cable Inc. (TWC - Analyst Report) reported weak financial results for the second quarter of 2014, where both the top and the bottom line fell below the respective Zacks Consensus Estimate.
However, the company significantly narrowed video subscriber loss in the reported quarter and also gained considerable residential high-speed data and voice subscribers. Meanwhile, total revenue and net income grew year over year.
Quarterly adjusted (excluding special items) earnings per share of $1.89 lagged the Zacks Consensus Estimate of $1.93. Quarterly GAAP net income came in at $499 million or $1.76 per share compared with $481 million or $1.64 per share in the prior-year quarter.
At $5,726 million, quarterly total revenue missed the Zacks Consensus Estimate of $5,741 million, but increased 3.2% year over year.
Quarterly adjusted operating income before depreciation and amortization (OIBDA) grew 0.8% year over year to $2,054 million. However, operating income inched down 2% year over year to $1,163 million. Average monthly revenue per user (ARPU) rose 1.7% to $106.98. Also residential high-speed data ARPU increased 9.7% to $46.92.
In the reported quarter, Time Warner Cable generated $1,695 million of cash from operations compared with $1,551 million in the prior-year quarter. Free cash flow in the second quarter of 2014 was $459 million as against $732 million in the year-ago quarter.
At the end of the second quarter of 2014, Time Warner Cable had $403 million in cash and marketable securities compared with $525 million at the end of 2013. Outstanding debt stood at $24,580 million as against $23,285 million at the end of 2013. At the end of the quarter under review, the debt-to-capitalization ratio stood at 0.76 against 0.77 at the end of fiscal 2013.
Residential Services Segment
Quarterly total revenue was $4,662 million, up 0.6% year over year. Within the segment, video revenues were $2,546 million, down 4.8% from the prior-year quarter. High-speed data revenues were $1,606 million, up 12.8% year over year. Voice revenues came in at $490 million, down 5.2% year over year. Other revenues were $20 million, up 17.6% from the year-ago quarter.
Subscriber Statistics: During second-quarter 2014, video subscribers declined by 152,000 to 11.011 million. High-speed data subscribers rose by 67,000 to 11.415 million. Voice subscribers grew 79,000 to 4.975 million. Single-play subscribers registered a deterioration of 20,000 to 5.656 million. Double-play subscribers dropped 56,000 to 4.712 million. Triple-play subscribers increased 42,000 to 4.107 million.
Business Services Segment
Quarterly total revenue stood at $691 million, up 22.3% year over year. Within the segment, video revenues were $90 million, up 3.4% year over year. High-speed data revenues were $331 million, up 23.5% year over year. Voice revenues totaled $123 million, up 20.6% from the year-earlier quarter. Wholesale transport revenues were $97 million, up by a substantial 59% year over year. Other revenues came in at $50 million, up 6.4% year over year.
Subscriber Statistics: During second-quarter 2014, video subscribers grew 5,000 to 201,000. High-speed data subscribers rose 19,000 to 550,000. Voice subscribers improved by 13,000 to 302,000. Single-play subscribers increased 8,000 to 336,000. Double-play subscribers registered growth of 10,000 to 249,000. Triple-play subscribers increased 3,000 to 73,000.
Other Operational Segment
Quarterly total revenue was $436 million, up 8.2% year over year. Within the segment, Advertising revenues were $272 million, up 4.6% from the prior-year quarter. Other revenues were $164 million, up 14.7% year over year.
In Feb 2014, Comcast Corp. (CMCSA - Analyst Report) reached an agreement with Time Warner Cable to acquire the latter in an all-stock deal valued at around $45.2 billion. Liberty Media Corp. (LMCA - Analyst Report), which controls a 27.3% stake in Charter Communications Inc. (CHTR - Analyst Report), was also aggressively pursuing the idea of Charter Communications taking over Time Warner Cable. However, Charter Communications lost to Comcast in the bid.
At present, the proposed merger between Comcast and Time Warner Cable is under strict regulatory scrutiny. The decision is expected to come in the first quarter of 2015. Time Warner Cable currently carries a Zacks Rank #3 (Hold).