Analysis of Reportable Segments
Time Warner Cable Inc. operates in 3 segments: Residential Services; Business Services; and Other Operations.
Segment Profit Margin
Time Warner Cable Inc., profit margin by reportable segment
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Residential Services | 44.76% | 46.75% | 47.21% | 47.93% | — |
| Business Services | 60.51% | 60.57% | 58.43% | 59.02% | — |
| Other Operations | 38.89% | 44.41% | 52.00% | 57.95% | — |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
The segment profit margins exhibit divergent trends across the three reportable segments between 2012 and 2015. While the Business Services segment maintained high and stable profitability, both Residential Services and Other Operations experienced contractions, with the latter showing a severe decline in margin efficiency.
- Residential Services
- A gradual downward trend in profit margins is observed, decreasing from 47.93% in 2012 to 44.76% by 2015. The consistent year-over-year decline suggests a steady erosion of profitability, potentially driven by increased operating costs or competitive pricing pressures within the residential market.
- Business Services
- This segment represents the most profitable and stable operation. After a minor decrease to 58.43% in 2013, the margin recovered to 60.57% in 2014 and remained nearly flat at 60.51% in 2015. This stability indicates strong cost control and sustained pricing power relative to the other segments.
- Other Operations
- A significant and accelerating compression of margins is evident in this segment. Profitability fell from 57.95% in 2012 to 38.89% in 2015, representing a total reduction of approximately 19 percentage points over the analyzed period. This sharp contraction indicates substantial operational headwinds or a fundamental shift in the cost structure of these activities.
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Segment Profit Margin: Residential Services
Time Warner Cable Inc.; Residential Services; segment profit margin calculation
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| OIBDA | 8,489) | 8,623) | 8,688) | 8,712) | —) |
| Revenue | 18,966) | 18,446) | 18,402) | 18,175) | —) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 44.76% | 46.75% | 47.21% | 47.93% | — |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Segment profit margin = 100 × OIBDA ÷ Revenue
= 100 × 8,489 ÷ 18,966 = 44.76%
The Residential Services segment exhibits a divergence between revenue growth and operating profitability over the period from 2012 to 2015. While total revenue followed a consistent upward trajectory, the operating income before depreciation and amortization (OIBDA) declined steadily, resulting in a continuous compression of the segment profit margin.
- Revenue Growth
- Revenue increased annually throughout the analyzed period, rising from 18,175 million USD in 2012 to 18,966 million USD by 2015. This indicates a steady expansion in the top-line performance of the residential segment.
- OIBDA Performance
- Despite the increase in revenue, OIBDA experienced a persistent decline. The value dropped from 8,712 million USD in 2012 to 8,489 million USD in 2015. This downward trend suggests that operating expenses grew at a faster rate than revenues, eroding the absolute operating profit.
- Segment Profit Margin Compression
- The segment profit margin reflects the combined effect of rising revenues and falling OIBDA. The margin declined from 47.93% in 2012 to 44.76% in 2015. The most significant drop occurred between 2014 and 2015, where the margin fell by nearly 2 percentage points, signaling a weakening in the operational efficiency of the residential services division.
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Segment Profit Margin: Business Services
Time Warner Cable Inc.; Business Services; segment profit margin calculation
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| OIBDA | 1,987) | 1,719) | 1,351) | 1,122) | —) |
| Revenue | 3,284) | 2,838) | 2,312) | 1,901) | —) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 60.51% | 60.57% | 58.43% | 59.02% | — |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Segment profit margin = 100 × OIBDA ÷ Revenue
= 100 × 1,987 ÷ 3,284 = 60.51%
The Business Services segment exhibited consistent growth in both scale and operational performance from 2012 through 2015. Revenue increased steadily from $1,901 million to $3,284 million over the period, while OIBDA rose from $1,122 million to $1,987 million, indicating a strong correlation between top-line expansion and operational earnings.
- Revenue Expansion
- A sustained upward trajectory is observed in revenue, with significant annual growth throughout the four-year period. This progression reflects a substantial increase in the segment's market presence and service delivery.
- Operational Profitability (OIBDA)
- OIBDA growth closely mirrored the revenue trend, increasing from $1,122 million in 2012 to $1,987 million by 2015. The alignment between revenue and OIBDA growth suggests that the segment successfully scaled its operations without incurring disproportionate operational costs.
- Segment Profit Margin Stability
- The segment profit margin remained remarkably stable, hovering around the 60% mark. Despite the significant growth in absolute figures, the margin fluctuated only slightly, moving from 59.02% in 2012 to a low of 58.43% in 2013, before stabilizing at approximately 60.5% in 2014 and 2015. This consistency indicates a highly disciplined cost structure and an ability to maintain profitability margins while expanding the business.
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Segment Profit Margin: Other Operations
Time Warner Cable Inc.; Other Operations; segment profit margin calculation
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| OIBDA | 665) | 787) | 833) | 846) | —) |
| Revenue | 1,710) | 1,772) | 1,602) | 1,460) | —) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 38.89% | 44.41% | 52.00% | 57.95% | — |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Segment profit margin = 100 × OIBDA ÷ Revenue
= 100 × 665 ÷ 1,710 = 38.89%
The Other Operations segment demonstrates a consistent contraction in profitability between 2012 and 2015. Despite a period of initial revenue growth, the segment experienced a steady decline in operating efficiency, as evidenced by the persistent drop in both OIBDA and the overall segment profit margin.
- Revenue Trends
- Revenue exhibited an upward trend from 2012 to 2014, increasing from US$ 1,460 million to US$ 1,772 million. This growth trend reversed in 2015, with revenue declining to US$ 1,710 million.
- OIBDA Performance
- Operating Income Before Depreciation and Amortization (OIBDA) declined consistently throughout the analyzed period. From a high of US$ 846 million in 2012, the figure decreased annually to US$ 833 million in 2013, US$ 787 million in 2014, and finally to US$ 665 million in 2015.
- Segment Profit Margin Erosion
- The segment profit margin experienced a significant and steady decline, falling from 57.95% in 2012 to 38.89% by 2015. The divergence between rising revenue through 2014 and falling OIBDA indicates that operating costs grew at a rate that outpaced revenue gains, leading to substantial margin compression over the four-year period.
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Revenue
Time Warner Cable Inc., revenue by reportable segment
US$ in millions
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Residential Services | 18,966) | 18,446) | 18,402) | 18,175) | —) |
| Business Services | 3,284) | 2,838) | 2,312) | 1,901) | —) |
| Other Operations | 1,710) | 1,772) | 1,602) | 1,460) | —) |
| Intersegment eliminations | (263) | (244) | (196) | (150) | —) |
| Total consolidated | 23,697) | 22,812) | 22,120) | 21,386) | —) |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
Total consolidated revenue demonstrated a consistent upward trajectory from 2012 to 2015, increasing from US$ 21,386 million to US$ 23,697 million. This steady growth indicates a sustained expansion of the company's top-line financial performance over the four-year period.
- Residential Services
- This segment remains the primary driver of total revenue, contributing the vast majority of the consolidated total. Revenue grew steadily from US$ 18,175 million in 2012 to US$ 18,966 million in 2015, reflecting a stable and incremental growth pattern.
- Business Services
- The Business Services segment exhibited the most significant growth rate among all reportable segments. Revenue increased from US$ 1,901 million in 2012 to US$ 3,284 million in 2015, representing a substantial expansion in market penetration or pricing power within the enterprise sector.
- Other Operations
- Revenue in this category increased from US$ 1,460 million in 2012 to a peak of US$ 1,772 million in 2014, before experiencing a slight contraction to US$ 1,710 million by the end of 2015.
Intersegment eliminations increased in magnitude throughout the period, rising from negative US$ 150 million in 2012 to negative US$ 263 million in 2015. This trend suggests an increase in the volume of internal transactions between the reportable segments as the overall scale of operations expanded.
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OIBDA
Time Warner Cable Inc., oibda by reportable segment
US$ in millions
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Residential Services | 8,489) | 8,623) | 8,688) | 8,712) | —) |
| Business Services | 1,987) | 1,719) | 1,351) | 1,122) | —) |
| Other Operations | 665) | 787) | 833) | 846) | —) |
| Shared functions | (3,206) | (3,126) | (3,011) | (2,971) | —) |
| Total consolidated | 7,935) | 8,003) | 7,861) | 7,709) | —) |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
The consolidated OIBDA reflects a period of moderate growth followed by a slight contraction, rising from 7,709 million US dollars in 2012 to a peak of 8,003 million in 2014, before declining to 7,935 million in 2015. This overall trajectory is characterized by a divergence in performance across the primary reportable segments, where significant growth in business services partially offset declines in residential and other operational areas.
- Business Services Performance
- A strong and consistent upward trend is observed in the Business Services segment. Contributions increased annually from 1,122 million US dollars in 2012 to 1,987 million in 2015, representing a substantial expansion of this segment's operational impact over the four-year period.
- Residential Services Trend
- Residential Services, while remaining the largest contributor to OIBDA, exhibited a gradual and continuous decline. Values decreased from 8,712 million US dollars in 2012 to 8,489 million in 2015, indicating a steady erosion of performance in the primary consumer-facing segment.
- Other Operations and Shared Functions
- A downward trend is evident in Other Operations, which fell from 846 million US dollars in 2012 to 665 million in 2015. Simultaneously, expenses associated with Shared Functions increased steadily, moving from -2,971 million US dollars in 2012 to -3,206 million in 2015, further impacting the consolidated total.
- Consolidated Analysis
- The growth observed in consolidated OIBDA between 2012 and 2014 was primarily driven by the rapid expansion of Business Services, which outweighed the losses in Residential Services and Other Operations. However, by 2015, the combined effect of declining residential and other revenues, alongside rising shared function costs, resulted in a year-over-year decrease in the total consolidated figure.
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