Time Warner Cable Business Update Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Welcome to the Time Warner Cable business update conference call. At this time all participants are in a listen-only mode. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I'll turn the conference over to Tom Robey, senior vice president of Investor Relations at the Time Warner Cable. Sir, you may begin.

TOM ROBEY, SVP INVESTOR RELATIONS, TIME WARNER CABLE: Thank you, Candy, and good morning, everyone. Welcome to Time Warner Cable's business update conference call.

Before we begin, there are four items I need to cover. First, a few words on our basic presentation this morning. On July 31, 2006, Time Warner New York, a subsidiary of Time Warner Cable, acquired a number of cable systems from Adelphia Communications Corporation. In addition Time Warner New York and Comcast exchanged a certain cable system. Prior to the acquisition, Comcast's interest in Time Warner Cable and one of our subsidiaries were redeemed for stock of subsidiaries holding both cash and cable systems.

Cable systems that were owned by Time Warner Cable prior to these transactions and then transferred to Comcast in the exchange and redemption transaction have been presented as discontinued operations.

Those systems that Time Warner Cable owned and consolidated in its financial results both before and after the transaction are referred to in our comments this morning as "legacy systems," and the systems at Time Warner Cable acquired in these transactions are referred to as "acquired systems." On January 1, 2007, Time Warner Cable and Comcast completed the distribution of assets related to Texas and Kansas City Cable Partners LP, a joint venture between the two companies.

Time Warner Cable received cable systems in Kansas City, Southwest Texas, and New Mexico, which we refer to as "the Kansas City pool."

Prior to January 1, 2007, the joint venture was accounted for and the equity investment and accordingly the financial results for the Kansas City pool were not consolidated in the Time Warner Cable results. However, the subscriber information we'll discuss today and that's included in our outlook includes the subscribers in the Kansas City pool within the legacy systems and total subscriber information.

Second, while our 2006 base year results do not include financial impact of the Kansas City pool, as I mentioned a moment ago, our 2007 business outlook, which we released earlier this morning, does reflect the consolidation of the Kansas City pool as of January 1, 2007. Details regarding the historical financial performance of these systems may be found in our recently filed Form 10-K.

Third, today's call includes certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, particularly statements regarding future financial and operating results of the company and its businesses.

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 made today due to changes in economics, business, competitive, technological, and/or regulatory factors.

More detailed information about these factors may be found in Time Warner Cable's SEC filings including its annual report on Form 10-K filed with the SEC last week in the sections entitled "Caution Concerning Forward-Looking Statements and Risk Factors."

Time Warner Cable is under no obligation to and, in fact, expressly disclaims any obligation to update or alter its forward-looking statements whether as a result of new information, future events, or otherwise.

And, finally, today's call also includes information concerning historical financial performance through December 31, 2006, of Time Warner Cable, and its expectations regarding future performance as reflected in non-GAAP financial measures such as operating income before depreciation and amortization, or OIBDA, and free cash flow.

Please note that these reconciliations of these and other historic non-GAAP financial measures to operating income and cash flow provided by operations or the other most directly comparable GAAP financial measure as applicable are posted on the company's website at www.timewarnercable.com/investors as applicable are included in the company's business outlook press release issued today, February 28, 2006.

With that covered, I'll thank you and turn the call over to Glenn Britt, president and chief executive officer of Time Warner Cable. Glenn?

GLENN BRITT, PRESIDENT AND CEO, TIME WARNER CABLE: Good morning and thank you for joining us. Let me start off by telling you why we're having this call today. Time Warner Cable is now a public company, and we expect our shares to begin trading tomorrow on the New York Stock Exchange. So we wanted to take this opportunity to formally introduce ourselves to the investment community and to share our perspective of the business, and also we want to provide some context for how we see this year progressing.

As Tom mentioned, we filed our 10-K last Friday, and this morning we put out a press release detailing our guidance business outlook for 2007. Joining us this morning is our chief operating officer, Landel Hobbs, who will cover our operation and especially the integration plans for the acquired properties, and also with us our chief financial officer, John Martin, who will provide some detailed perspective on our outlook.

I don't want to spend too much time on last year but, suffice it to say, that 2006 was the best year we've had since I've been CEO, and perhaps the best year ever in the company's history. Without a doubt, it was certainly the busiest year that any of us can remember.

For example, our legacy systems posted record RGU, or revenue generating unit growth, and net subscriber additions accelerated across every key product category as compared to the prior year.

Basic video, which is the most mature of our offerings, added three times the number of net subscribers that we added in the preceding year. Again, this is for our legacy systems.

Residential high speed data additions, net additions, in those same legacy systems increased 20% compared to the prior year, and I think that is amazing, given that we've been selling that product for 10 years now.

And, of course, digital phone had its best year ever, so far.

These great subscriber trends went directly to robust financial results and in our legacy systems revenues grew 15% in 2006, and that was our highest full-year revenue growth in four years.

Now, we delivered these outstanding results while we're busy planning for closing and then beginning to integrate a very, very significant set of transactions with Adelphia and Comcast.

Approximately 4 million out of our 13.4 million basic video subscribers are new to us. We see lots of opportunity in these new systems, and we acquired them for prices significantly below current per-subscriber trading values.

As a result of these transactions, our company will be no just a larger Time Warner Cable but also a stronger Time Warner Cable that has better clustering and increased strategic flexibility.

Now let's talk about what we're going to do this year -- 2007. It's all about execution. It was great execution in 2006 that helped us gain more new customers than ever before, and it was great execution that enabled us to generate our outstanding financial results.

In our release this morning, we set out some of our financial goals for this year. They are revenue [inaudible] growth in mid to high 30% range, and we expect to deliver full-year free cash flow in the range of $800 million to $1 billion. Underlying this outlook is our …