Time Warner: Subs Down, Dividend Up In Q4


Time Warner Cable's fourth-quarter results were a slightly mixed bag Thursday, as basic-subscriber losses were heavier than expected, but the country's second-largest cable operator managed to beat already lowered expectation in other subscriber metrics and pledged a dividend that topped most analysts' estimates.
Time Warner Cable lost about 105,000 basic customers in the quarter, heavier than analysts' estimates of between 30,000 and 80,000 losses. But the company made a big commitment to returning cash to shareholders, approving a $1.60 per share annual dividend (4 cents per share per quarter) that represents a yield of 3.6%. Most analysts were expecting a dividend yield of between 2% and 4%.
At the end of the third quarter, Time Warner Cable had warned that the fourth quarter would be slower as the national economy continued to weigh on operations. However, it appears the company's fears were mostly unwarranted.
For the quarter, revenue rose 3% to $4.5 billion and adjusted operating income before depreciation and amortization (AOIBDA) increased to $1.7 billion (also up 3%). Net income for the quarter was $322 million (91 cents per share), compared to a loss of $8.2 billion in 2008). Free cash flow was $421 million (down 13%) but ahead of analysts' estimates in the $380 million range. For the full year revenue rose 3.9% to $17.9 billion, adjusted OIBDA increased 4.7% to $6.5 billion, and free cash flow was up 10.2% to $1.9 billion. Net income for the full year was $1.1 billion ($3.07 per share), compared to a loss of $7.3 billion ($22.55 per share) in 2008, mainly due to one-time charges.
On the subscriber front, TWC added 56,000 digital customers, 122,000 high-speed data subscribers and 84,000 digital phone subscribers.
Time Warner Cable chairman and CEO Glenn Britt was pleased with the results.
"We enter 2010 with a strong business and a strong balance sheet, and we are very pleased to demonstrate confidence in our free cash flow by initiating a meaningful quarterly dividend," Britt said in a statement. "In the year ahead, we are excited about the investments we are making to drive further growth, and we expect to execute with the same discipline our investors have come to expect. We are well positioned to meet the challenges and opportunities ahead."
In a research note, Sanford Bernstein cable and satellite analyst Craig Moffett was encouraged by the better than expected results.
"Today's results are precisely what the doctor ordered," Moffett, who has an "outperform" rating on TWC, wrote. "We continue to view Time Warner Cable as the single most attractive name in our coverage universe... and by a wide margin."
Time Warner Cable is scheduled to hold its quarterly conference call with analysts at 8:30 a.m.