Time Warner Cable Inc. (TWC) reported Thursday a 11% fall in profit for the third quarter, hurt by higher interest expense, despite a 4% growth in revenues. Quarterly earnings per share for the second-largest cable operator in the U.S., however, topped market projections, with top line also beating Street view.
New York -based Time Warner Cable, which was formerly a subsidiary of media and entertainment giant Time Warner Inc. (TWX), reported that third-quarter net income attributable to the company was $268 million, compared to profit $301 million last year. On a per share basis, earnings fell 17% to $0.76 from $0.92 a year ago. The company's prior year's per share results were recast to reflect the reverse stock split of all outstanding and treasury shares of TWC Common Stock at a 1-for-3 ratio on March 12, 2009.
On average, 19 analysts polled by Thomson Reuters expected earnings per share of $0.75 for the quarter. Analysts' estimate typically exclude special items.
Time Warner Cable attributed the decline in net income primarily to higher interest expense related to the debt incurred to fund its $10.9 billion special cash dividend paid in March 2009, partly offset by higher operating income and lower net income attributable to non-controlling interests and income tax expense.
Quarterly total revenues rose to $4.50 billion from $4.34 billion a year earlier, and beat sixteen Wall Street analysts' consensus estimate of $4.47 billion.
Subscription revenues grew 5% to $4.32 billion from $4.12 billion a year ago, reflecting video price increases and continued growth in digital video, high-speed data and Digital Phone subscribers. These were partially offset by lower basic video subscribers.
In the segment, video revenues rose 2% from last year to $2.70 billion, high-speed data revenues grew 8% to $1.14 billion, and revenues from voice went up 14% to $480 million.
Meanwhile, advertising revenues declined 19% from last year to $182 million, due primarily to year-over-year declines in the auto, media and political categories.
Adjusted operating income before depreciation and amortization, or adjusted OIBDA, rose 4% to $1.6 billion, and adjusted OIBDA margin edged up to 36.1% from 36% a year ago. Operating income for the quarter grew 5% to $828 million from last year's $788 million.
In the quarter, interest expense totaled $348 million, higher than last year's $229 million.
Third-quarter video subscribers were 12.96 million, lower than preceding second quarter's 13.05 million. Primary Service Units, or PSUs, which represent the total of all video, high-speed data and voice subscribers, were 26.3 million. Revenue generating units increased sequentially to 35.08 million from 34.96 million in the second quarter.
Time Warner Cable Chief Executive Officer Glenn Britt said, "In the third quarter we grew both Revenues and Adjusted OIBDA by 4%, and we continued to generate a considerable amount of cash. This has enabled us to further pay down the debt we incurred to fund our special dividend."
In its preceding second quarter, Time Warner Cable said its net income attributable to the company increased to $316 million or $0.89 per share from $277 million or $0.85 per share in the comparable period. Total revenues rose 4% to $4.47 billion from $4.30 billion in the year earlier period.
Time Warner Cable's former parent company, Time Warner, which expects to spin off AOL unit by the end of the year, reported Wednesday a lower profit for the third quarter, reflecting weak revenues at the AOL, Publishing and Filmed Entertainment segments that more than offset growth at the Networks segment. The New York-based company's third-quarter net income attributable to shareholders was $661 million or $0.55 per share, compared to $1.07 billion or $0.89 per share in the year-ago quarter. Adjusted income from continuing operations declined to $724 million from $784 million in the prior-year quarter. Total revenues dropped 6% year-over-year to $7.14 billion.
Among others in the sector, cable services provider Comcast Corp. (CMCSA, CMCSK) Wednesday reported a 22% increase in third-quarter profit to $944 million or $0.33 per share from $771 million or $0.26 per share last year, helped by an increase in revenues and lower capital spending during the quarter. The Philadelphia, Pennsylvania-based company's earnings per share, excluding items, would have grown 21.7% over the prior year. Revenues increased 3% to $8.80 billion from $8.55 billion a year ago. However, the company reported slower customer growth in the latest quarter compared to previous year, although results were an improvement over the preceding second quarter.
DIRECTV Group Inc. (DTV) is scheduled to release its third-quarter results today, with analysts forecasting earnings of $0.39 per share on revenues of $5.42 billion, in comparison to prior year's earnings of $0.33 per share and revenues of $4.98 billion.
Another peer, Dish Network Corp. (DISH) will announce financial results for its third quarter on Monday, November 9. Analysts expect the company to report earnings of $0.46 per share on revenues of $2.93 billion for the quarter, compared to last year's earnings and revenues of $0.20 per share and $2.94 billion, respectively.
For the nine months of fiscal 2009, Time Warner Cable's net income attributable to the company was $748 million, down 9% from $820 million a year ago. On a per share basis, earnings fell 15% to $2.14 from $2.52 last year. However, total revenues grew 4% to $13.34 billion from $12.80 billion in the previous year.
Looking ahead, Britt said, "We're on track to return to our target leverage in the first quarter of 2010. Our business model is resilient even in a tough economy and in the face of intense competition. We've built great assets in our plant and customer relationships that provide a strong foundation for continuing growth. We intend to continue operating the business aggressively yet prudently to generate attractive returns for our shareholders."
TWC closed Wednesday's regular trading session at $40.05, up $0.43 or 1.09%, on a volume of 2.30 million shares. In the past 52 weeks, shares have been trading in a broad range of $20.19 to $70.50.
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