SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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TIME WARNER CABLE INC.
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On January 30, 2014, the following materials were posted to Time Warner Cable Inc.’s website:
TWC and Charter Comparison January 30, 2014 |
Forward-Looking Statements and Disclaimers 2 ADDITIONAL INFORMATION Time Warner Cable expects to file a proxy statement with the U.S. Securities and Exchange Commission (“SEC”) and to provide any definitive proxy statement to its security holders. INVESTORS AND SECURITY HOLDERS OF TIME WARNER CABLE ARE URGED TO READ THIS DOCUMENT AND ANY OTHER DOCUMENTS FILED BY TIME WARNER CABLE WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain free copies of the definitive proxy statement (when available) and any other documents filed with the SEC by Time Warner Cable through the web site maintained by the SEC at http://www.sec.gov. CERTAIN INFORMATION REGARDING PARTICIPANTS Time Warner Cable and certain of its directors and executive officers may be deemed to be participants in a solicitation under the rules of the SEC. Security holders may obtain information regarding the names, affiliations and interests of Time Warner Cable’s directors and executive officers in Time Warner Cable’s Annual Report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on February 15, 2013, and its proxy statement for the 2013 Annual Meeting, which was filed with the SEC on April 4, 2013. These documents can be obtained free of charge from the sources indicated above. Additional information regarding the interests of these participants in any proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will also be included in any proxy statement and other relevant materials to be filed with the SEC if and when they become available. FORWARD-LOOKING STATEMENTS AND DISCLAIMERS This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. This document includes certain forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Time Warner Cable intends that all such statements be covered by the safe harbor provisions of the federal securities laws. Statements herein regarding future financial and operating results and any other statements about future expectations constitute “forward-looking statements.” These forward-looking statements may be identified by words such as “believe,” “expects,” “anticipates,” “projects,” “intends,” “should,” “estimates” or similar expressions. These statements are based on management’s current expectations or beliefs, and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological, strategic and/or regulatory factors, and other factors affecting the operations of Time Warner Cable. More detailed information about these factors may be found in filings by Time Warner Cable with the SEC, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Time Warner Cable is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise. The materials herein may contain certain previously published third-party material. Unless otherwise indicated, consent of the author and publication has not been obtained to use the material as proxy soliciting material. All trademarks remain the property of their respective owners. |
TWC is Better Positioned Than Charter, Reflecting Years of Innovation and Investment TWC has higher video and high-speed data (HSD) penetration TWC generates more Revenue, Adjusted OIBDA and Free Cash Flow per passing TWC provides significantly more high-definition (HD) channels and video on demand (VOD) content • TWC invested ~$750 million in switched digital video and node splitting, resulting in TWC having the best-in-class two-way hybrid fiber coaxial (HFC) network, which has allowed us to provide significantly more HD channels and VOD capacity • TWC TV®, our IP video app, is now available on 7 platforms with 300 live channels and over 4,000 hours of VOD in the home and up to 24 live channels and 1,200 hours of VOD from 40 networks outside of the home TWC offers customers home management and security service over broadband (IntelligentHome); Charter does not TWC provides customers access to over 200k Cable Wi-Fi® hotspots; Charter does not TWC’s residential philosophy emphasizes consumer choice • TWC: Emphasizes consumer choice; offers a variety of HSD speeds at different prices and allows consumers to choose traditional set top boxes or embrace the bring-your-own-box environment (including IPTV options such as Roku™) • Charter: Generally deploys traditional set-top boxes in homes and forces customers to pay for those boxes TWC offers a much stronger business services platform with an experienced team, dedicated resources and an expansive network with 860K buildings on network, including 58K fiber connected buildings, and 14K connected cell towers TWC has a $1 billion media sales business that also sells advertising on behalf of Charter in several of Charter’s key service areas (including LA and Dallas) Note: Refer to slides 9-11 for definitions, additional information and reconciliations for non-GAAP financial measures. 3 TWC provides a broader video experience across multiple consumer platforms, both inside and outside the home |
Time Warner Cable (12/31/2013) Charter (9/30/2013) Video 38.1% 34.0% HSD 38.9% 36.4% Voice 17.3% 19.9% “All Digital” Markets NYC; Augusta, ME; Parts of KY and IN (1) ; Parts of LA (100% LA in 2014) Fort Worth, TX; Parts of CA, SC, MA, MI 36.1% 34.6% 21.6% 13.5% 11.8% 4.5% $106 $107 Per Average Estimated Passing: $744 $652 268 226 161 88 88 29 TWC Has Higher Margins and Generates More Adjusted OIBDA and FCF Per Passing, Despite More Competitive Footprint 4 Source: Company filings Note: (1) (2) Penetration Metrics (Residential & Business) LTM Margins (2) (3) LTM Financials per Customer Relationship and Estimated Passing (3) Adjusted OIBDA as % of revenue Adjusted OIBDA less Capex as % of revenue Free Cash Flow as % of revenue Average Monthly Revenue Per Customer Relationship: Residential services Revenue Adjusted OIBDA Adjusted OIBDA less Capex Free Cash Flow (reported) Refer to slides 9-11 for definitions, additional information and reconciliations for non-GAAP financial measures. TWC metrics and LTM financials through Q4 2013; Charter metrics and LTM financials through Q3 2013 and pro forma for Bresnan, per Charter 3Q 2013 trending schedule. Charter Adjusted OIBDA calculated as reported Adjusted EBITDA less stock based compensation. Includes Louisville, Lexington, Covington and Bowling Green, KY and Evansville, IN. Includes residential and business services. (3) Free Cash Flow metrics based on reported financials (not pro forma for Bresnan) as Free Cash Flow not reported pro forma for Bresnan. |
TWC Has a More Advanced Video Product and Offers Broader Customer Choice 5 Time Warner Cable (12/31/2013) Charter (9/30/2013) 183 101 231 (NYC) 170 18K+ 10K+ 75K Hours (2014) Unknown 2.8mm going to 6mm in 2014 Potentially coming 2014 Yes Not Currently Offered Apple™ iOS, Android™, Roku™, Samsung™ Smart TVs, Xbox 360™, Amazon Kindle Fire™, PC and Mac Computers iOS, Android™, Amazon Kindle Fire™ 300 100 Over 4,000 Unknown Up to 24 Live Channels (2) and 1,200 Hours of VOD Content from 40 Networks 1 Network Group 26 TWC News Channels 16 TWC Sports Channels 10 Others (incl. English and Spanish) None 100 Mbps (going to 300 Mbps in 2014) 100 Mbps 30K None 200K+ None IntelligentHome (44K subscribers) None Video #12 / HSD #13 / Voice #12 Video #11 / HSD #12 / Voice #10 Video Product (1) (2) HSD and Other Residential Offerings Other Source: Company filings, Call transcripts. Note: TWC also sells advertising on behalf of Charter in several service areas, including LA, Dallas, Charlotte, Green Bay and Raleigh. (1) Source: Charter 3Q’13 Earnings Call transcript. (2) Channels available to customers in given markets. Average Number of HD Channels Most Number of HD Channels On Demand Movies and TV Shows VOD Hours of Capacity STB with cloud-based guide Whole Home DVR Offering In-Home Live IP Linear Channels In-Home VOD Hours (TV App) Out-of-Home Content (TV App) Fastest Internet Speed Company WiFi Hotspots Access to Cable Wi-Fi® hotspots Home Security & Automation J.D. Power 2013 Overall Customer Satisfaction Rankings TV Apps Exclusive Local Content |
Time Warner Cable (12/31/2013) Charter (9/30/2013) LTM Business services revenue $2.3 billion $0.8 billion Customer Relationships 624 359 Video 196 166 HSD 517 245 Voice 275 138 Fiber Lit Buildings 58K 6K Cell Towers 14K 3K Buildings on Network 860K Unknown Anticipated new buildings in 2014 75K Unknown Hosting and Cloud Computing NaviSite Offerings Enterprise-Class Hosting Managed Applications Cloud Computing Basic Web and Email Hosting Business Services Acquisitions NaviSite (2011) DukeNet (2013) None Scale TWC Has a Much Broader Business Services Organization With Dedicated Resources 6 Business Services Subs (000s) Business Services Offerings (1) Source: Company filings, Call transcripts, Telecom Ramblings. Note: TWC metrics and LTM financials through Q4 2013; Charter metrics and LTM financials through Q3 2013 and pro forma for Bresnan, per Charter 3Q 2013 trending schedule. TWC services cell towers in Charter’s markets through DukeNet acquisition. (1) Charter equivalizes its business video customers and customer relationships while TWC reports billable subscribers. For commercial accounts, equivalizing results in a higher subscriber count than reporting on a billable basis (i.e., if TWC was to report on an equivalized basis the subscriber and customer relationship count would be meaningfully higher). (2) Source: Telecom Ramblings. (3) Source: Charter Investor Presentation 12/4/2012 (most recently available data). (1) (2) (3) |
TWC Has Been Recognized for Superior Technology and Business Customer Service 7 TWC Technical and Engineering Emmy® Awards (Charter has none) TWC Business Services Recognition Engineering Award for Outstanding Achievement in Technological Development Mid-1990s Best Use of On Demand Technology Over Private Networks for Start Over® 2005-2006 Development, Productization and Commercialization of Interactive Video on Demand Two-Way Infrastructure and Signaling 2006-2007 Pioneering the Development of Multi-Room DVR 2011-2012 Development and Commercialization of Cable Interconnects for Local Video Ad Insertion 2011-2012 Pioneering Work in Implementation and Deployment of 2012-2013 Pioneering Development of VOD Dynamic Advertising Insertion 2012-2013 Full-Service Network 2011 J.D. Power Highest in Customer Satisfaction with Large Enterprise Business Wireline Service 2013 CRN Top Channel Partner in the Network Connectivity Category 2013 Frost & Sullivan Primary Network Service Provider of Choice for U.S. Business Communications Executives 2012 |
Non-GAAP Financial Measures and Reconciliation Schedules |
9 Non-GAAP Financial Measures In discussing its performance, the Company may use certain measures that are not calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). These measures include OIBDA, Adjusted OIBDA, Adjusted OIBDA less capital expenditures and Free Cash Flow, which the Company defines as follows: • OIBDA (Operating Income before Depreciation and Amortization) means Operating Income before depreciation of tangible assets and amortization of intangible assets. • Adjusted OIBDA means OIBDA excluding the impact, if any, of noncash impairments of goodwill, intangible and fixed assets; gains and losses on asset sales; merger-related and restructuring costs; and costs associated with certain equity awards granted to employees to offset value lost as a result of TWC’s separation from Time Warner Inc. on March 12, 2009. • Adjusted OIBDA less capital expenditures means Adjusted OIBDA minus capital expenditures. • Free Cash Flow means cash provided by operating activities (as defined under GAAP) excluding the impact, if any, of cash provided or used by discontinued operations, plus (i) any income taxes paid on investment sales and (ii) any excess tax benefit from equity-based compensation, less (i) capital expenditures, (ii) cash paid for other intangible assets (excluding those associated with business combinations), (iii) partnership distributions to third parties and (iv) principal payments on capital leases. Management uses OIBDA and Adjusted OIBDA, among other measures, in evaluating the performance of the Company’s business because they eliminate the effects of (i) considerable amounts of noncash depreciation and amortization and (ii) items not within the control of the Company’s operations managers (such as income tax provision, other income (expense), net, and interest expense, net). Adjusted OIBDA further eliminates the effects of certain noncash items identified in the definition of Adjusted OIBDA above. Adjusted OIBDA less capital expenditures also allows management to evaluate performance including the effect of capital spending decisions. Adjusted OIBDA and Adjusted OIBDA less capital expenditures are also significant performance measures used in the Company’s annual incentive compensation programs. Management believes that Free Cash Flow is an important indicator of the Company’s ability to generate cash, reduce net debt, pay dividends, repurchase common stock and make strategic investments, after the payment of cash taxes, interest and other cash items. In addition, all of these measures are commonly used by analysts, investors and others in evaluating the Company’s performance and liquidity. These measures have inherent limitations. For example, OIBDA and Adjusted OIBDA do not reflect capital expenditures or the periodic costs of certain capitalized assets used in generating revenue. To compensate for such limitations, management evaluates performance through Adjusted OIBDA less capital expenditures and Free Cash Flow, which reflect capital expenditure decisions, and net income attributable to TWC shareholders, which reflects the periodic costs of capitalized assets. Adjusted OIBDA and Adjusted OIBDA less capital expenditures do not reflect any of the items noted as exclusions in the definition of Adjusted OIBDA above. To compensate for these limitations, management evaluates performance through OIBDA and net income attributable to TWC shareholders, which do reflect such items. OIBDA, Adjusted OIBDA and Adjusted OIBDA less capital expenditures also fail to reflect the significant costs borne by the Company for income taxes and debt servicing costs, the results of the Company’s equity investments and other non-operational income or expense. Management compensates for these limitations by using other analytics such as a review of net income attributable to TWC shareholders. Free Cash Flow, a liquidity measure, does not reflect payments made in connection with investments and acquisitions, which reduce liquidity. To compensate for this limitation, management evaluates such investments and acquisitions through other measures such as return on investment analyses. These non-GAAP measures should be considered in addition to, not as substitutes for, the Company’s Operating Income, net income attributable to TWC shareholders and various cash flow measures (e.g., cash provided by operating activities), as well as other measures of financial performance and liquidity reported in accordance with GAAP, and may not be comparable to similarly titled measures used by other companies. |
Reconciliations of Non-GAAP Financial Measures for the Year Ended December 31, 2013 ($ in millions) 10 Reconciliation of Adjusted OIBDA to Operating Income: Adjusted OIBDA 7,980 $ Merger-related and restructuring costs (119) Depreciation (3,155) Amortization (126) Operating Income 4,580 $ Adjusted OIBDA and Operating Income less capital expenditures Total capital expenditures 3,198 $ Adjusted OIBDA less capital expenditures 4,782 $ Operating Income less capital expenditures 1,382 $ Reconciliation of Cash provided by operating activities to Free Cash Flow: Cash provided by operating activities 5,753 $ Add: Excess tax benefit from equity-based compensation 93 Less: Capital expenditures (3,198) Cash paid for other intangible assets (40) Other (2) Free Cash Flow 2,606 $ |
Reconciliations of Non-GAAP Financial Measures for the Year Ended December 31, 2013 ($ in millions, except per average estimated passing metrics) 11 Metrics as percentages of revenue: Total revenue 22,120 $ Adjusted OIBDA as a percentage of revenue 36.1% Operating Income as a percentage of revenue 20.7% Adjusted OIBDA less capital expenditures as a percentage of revenue 21.6% Operating Income less capital expenditures as a percentage of revenue 6.2% Free Cash Flow as a percentage of revenue 11.8% Cash provided by operating activities as a percentage of revenue 26.0% Metrics per average estimated passing: Average annual estimated passings (in thousands) 29,732 Adjusted OIBDA per average annual estimated passing 268 $ Operating Income per average annual estimated passing 154 $ Adjusted OIBDA less capital expenditures per average annual estimated passing 161 $ Operating Income less capital expenditures per average annual estimated passing 46 $ Free Cash Flow per average annual estimated passing 88 $ Cash provided by operating activities per average annual estimated passing 193 $ |