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
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨ | Preliminary Proxy Statement | |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
¨ | Definitive Proxy Statement | |
¨ | Definitive Additional Materials | |
x | Soliciting Material Pursuant to §240.14a-12 |
TIME WARNER CABLE INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. | |||
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On January 30, 2014, the following materials were posted to Time Warner Cable Inc.s website:
Fourth-Quarter & Full-Year 2013
Earnings Summary
January 30, 2014 |
Caution Concerning
Forward-Looking Statements and Non-GAAP Financial Measures
2
Todays presentation does not constitute an offer to buy or solicitation of an offer to
sell any securities. This presentation 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 managements 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.
This presentation includes information regarding the historical financial performance through
December 31, 2013 of Time Warner Cable and its expectations regarding future
performance, including historical financial performance as reflected in non-GAAP
financial measures such as OIBDA (Operating Income before Depreciation and Amortization), Adjusted OIBDA,
Adjusted OIBDA less capital expenditures, Adjusted net income attributable to TWC
shareholders, Adjusted Diluted EPS and Free Cash Flow. Please note that schedules
setting out the reconciliation of historical non-GAAP financial measures to
Operating Income, net income attributable to TWC shareholders and cash provided by operating
activities or other most directly comparable GAAP financial measures, as applicable,
are included in the trending schedules posted on the Time Warner Cable company website
at www.twc.com/investors and, as applicable, also are included in the Companys
earnings release for the quarter ended December 31, 2013, which can also be accessed from the
Companys website.
|
Legends
ADDITIONAL INFORMATION
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 Cables
directors and executive officers in Time Warner Cables 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.
3
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. |
4
Quarterly Highlights
Refer to Endnotes on slide 15 of definitions.
Financial Highlights
Full-year revenue grew 3.4% year over year, driven primarily by growth of 21.6% in business
services revenue and 14.4% in residential high-speed data revenue. .
Operational Highlights
Residential subscriber performance improved sequentially each month during Q4 and continued to improve
in January. TWC now offers residential high-speed data speeds of 100 Mbps in several cities
and regions, including Los Angeles, Kansas City and Hawaii. Residential wideband high-speed
data subscribers (which includes the 30, 50, 75 and 100 Mbps tiers) more than doubled year over
year to 910,000 subscribers.
TWCs first generation cloud-based guide with an advanced VOD portal was installed on 2.8
million set-top boxes at year end. As
of December 31, 2013, TWCs video customers had access to 183 HD channels on average.
Time Warner Cable ended 2013 with 44,000 IntelligentHome customers, an increase of 32,000 subscribers
during the year. IntelligentHome is now offered virtually throughout the Companys
footprint. During the fourth quarter, TWC added 16,000 commercial buildings to its network, ending the year with
connectivity to 860,000 commercial buildings. On
December 31, 2013, the Company acquired DukeNet a regional fiber optic network company primarily serving the
Carolinas for $572 million in cash (including the repayment of debt), net of cash acquired and
capital leases assumed. With the acquisition of DukeNet, TWC ended 2013 with 14,000 cell towers
installed on its network.
The
TWC
TV
®
app
is
now
available
on
the
Amazon
Kindle
Fire
platform,
in
addition
to
Apple
iOS
and
Android
tablets
and
smartphones,
Roku
Streaming
Players,
Samsung
Smart
TVs
and
Xbox
360
video
game
consoles,
and
on
PC
and
Mac
computers
via
www.twctv.com.
TWC
TV
®
features
up
to
300
linear
channels
and
over
4,000
hours
of
VOD
programming
on
all
TWC
TV
®
app
platforms
in
the
home
and
up
to
24
live
channels
and
1,200
hours
of
VOD
content
from
40
networks
outside
of
the
home.
Fourth-quarter
2013
average
monthly
revenue
per
residential
customer
relationship
ARPU
(1)
grew
2.2%
to
$106.03,
which
is
the
highest
rate
of
growth
since
the
first
quarter
of
2012.
Residential
high-speed
data
ARPU
(1)
increased
12.4% to $46.21.
During
2013,
total
return
of
capital
(6)
increased
28%
to
$3.3
billion.
Since
inception
of
the
share
repurchase
program
in
November
2010
through
December
31,
2013,
TWC
has
repurchased
over
25%
of
its
outstanding
shares
for
$7.5
billion at an average price of $82.51 per share.
TWC
expanded
its
WiFi
initiative,
finishing
2013
with
30,000
TWC
WiFi
®
access
points.
Through
the
Cable
Wi-Fi
®
network, most TWC high-speed data customers now have access to more than
200,000 hotspots across the U.S. |
5
Selected Financial Results
Refer to slides 15-17 for definitions, additional information and reconciliations of
non-GAAP financial measures. (in millions, except per share data)
Revenue
$
5,577
$
5,485
$
92
1.7%
$
22,120
$
21,386
$
734
3.4%
Adjusted OIBDA
(2)
$
2,026
$
1,994
$
32
1.6%
$
7,980
$
7,824
$
156
2.0%
Operating Income
$
1,173
$
1,169
$
4
0.3%
$
4,580
$
4,445
$
135
3.0%
Diluted EPS
(4)
$
1.89
$
1.68
$
0.21
12.5%
$
6.70
$
6.90
$
(0.20)
(2.9%)
Adjusted Diluted EPS
(3)
$
1.82
$
1.57
$
0.25
15.9%
$
6.61
$
5.75
$
0.86
15.0%
Cash provided by operating activities
$
1,599
$
1,410
$
189
13.4%
$
5,753
$
5,525
$
228
4.1%
Capital expenditures
$
827
$
904
$
(77)
(8.5%)
$
3,198
$
3,095
$
103
3.3%
Free Cash Flow
(5)
$
773
$
587
$
186
31.7%
$
2,606
$
2,552
$
54
2.1%
Return of capital
(6)
$
868
$
742
$
126
17.0%
$
3,284
$
2,564
$
720
28.1%
4th Quarter
Full Year
Change
Change
$
%
%
2013
2012
$
2013
2012 |
6
Residential Customer Relationships and Video, High-speed
Data and Voice Subscriber Trends All Improved Sequentially
Throughout the Quarter and January
Residential Video Subscribers
Residential Customer Relationships
Residential HSD Subscribers
Residential Voice Subscribers
Net Additions (Declines)
(in Thousands) |
7
Total Revenue
Revenue
($ in Millions)
Total Customer Relationship ARPU
(1)
Refer to Endnotes on slide 15 for definitions. |
8
Residential, Business and Advertising Revenue
Business Services
($ in Millions)
$616
$515
Advertising
($ in Millions)
Residential Services
($ in Millions)
$20
$17
$4,580
$4,577
$313
$278 |
9
Adjusted OIBDA
(2)
& Operating Income
Adjusted OIBDA
(2)
($ in Millions)
Adjusted OIBDA Margin
(7)
36.4%
4Q12
4Q13
36.3%
Operating Income
($ in Millions)
Operating Income Margin
(8)
21.3%
4Q12
4Q13
21.0%
Operating Expenses
+
($ in Millions)
$3,551
$3,491
Refer to slides 15-17 for definitions, additional information and reconciliations of
non-GAAP financial measures. *All Other
Operating Expense consists of Marketing, Voice, Video Franchise and Other Fees, High-speed Data, Bad Debt and Other Expenses.
+
Operating Expenses consist of Cost of Revenue and Selling, General & Administrative
Expenses. |
Diluted
Earnings Per Share Diluted EPS
(4)
Adjusted Diluted EPS
(3)
Refer to slides 15-17 for definitions, additional information and reconciliations of
non-GAAP financial measures. 10
305.6
4Q12
4Q13
285.2
Average Diluted Common Shares
Outstanding
(in Millions)
Net income attributable to TWC
shareholders increased 5.3%
Average diluted common shares
declined 6.7%
Adjusted net income attributable to
TWC shareholders increased 8.6%
Average diluted common shares
declined 6.7% |
Capital
Expenditures Refer to Endnotes on slide 15 for definitions.
Three-Month Capital Expenditures
($ in Millions)
Three-Month
Capital
Intensity
(9)
Total
16.5%
4Q12
4Q13
14.8%
11
Twelve-Month Capital Expenditures
($ in Millions)
Twelve-Month
Capital
Intensity
(9)
Total
14.5%
2012
2013
14.5%
$827
$904
$3,198
$3,095 |
Free Cash
Flow (5)
12
($ in Millions)
Twelve Months Ended December 31,
Refer to slides 15-17 for definitions, additional information and reconciliations of
non-GAAP financial measures.
Growth in Free Cash Flow driven by lower
pension plan contributions and higher
Adjusted OIBDA, partially offset by higher
net income tax payments, increased capital
expenditures and a change in working
capital requirements. |
13
Stimulus Program Impact on Cash Taxes
Actual Historical Impact
Expected to drive approximately $175m decrease in cash flow generation in 2014
Projected Impact*
($ in Millions)
*Realized impact will depend on actual capital expenditures. This analysis includes the
impact from enacted stimulus laws to date and assumes capital spending excluding
acquisitions remains around the 2014 expected level of $3.7 to $3.8 billion during each of those years. |
Return of
Capital (6)
2Q12
4Q11
1Q12
3Q12
14
4Q12
($ in Millions)
(5)
1Q13
3Q13
2Q13
4Q13
$391
$718
$824
$423
$587
$661
$732
$440
$773
$154
$179
$177
$173
$171
$195
$191
$187
$185
$366
$353
$440
$500
$571
$660
$638
$545
$683
Free Cash Flow
Dividends
Share Repurchases
Refer to slides 15-17 for definitions, additional information and reconciliations of
non-GAAP financial measures. |
Endnotes
15
(1) ARPU represents average monthly revenue per unit. Residential customer relationship
ARPU represents residential services revenue divided by the corresponding average
residential customer relationships for the period. Total customer relationship
ARPU represents total revenue divided by the corresponding average customer
relationships for the period. Residential high-speed data ARPU represents residential high-speed data
revenue divided by the corresponding average residential high-speed data subscribers for
that period.
(2) Adjusted OIBDA is defined as Operating Income before Depreciation and Amortization
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 the Companys separation from Time Warner Inc.
(3) Adjusted Diluted EPS means net income per diluted common share attributable to TWC common
shareholders excluding the impact, if any, of noncash impairments of goodwill,
intangible and fixed assets and investments; gains and losses on asset sales;
merger-related and restructuring costs; changes in the Companys equity award
reimbursement obligation to Time Warner Inc.; certain changes to income tax provision; and
costs associated with certain equity awards granted to employees to offset value lost as
a result of the Companys separation from Time Warner Inc.; as well as the impact
of taxes and noncontrolling interests on the above items.
(4) Diluted earnings per share (EPS) is defined as net income per diluted common share
attributable to TWC common shareholders.
(5) Free Cash Flow is defined as 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.
(6) Return of capital represents dividends paid and share repurchases and does not reflect the
fees, commissions or other costs associated with the stock repurchase program.
(7) Adjusted OIBDA margin is defined as Adjusted OIBDA as a percentage of total revenue.
(8) Operating Income margin is defined as Operating Income as a percentage of total
revenue. (9) Capital intensity is defined as capital expenditures as a percentage of revenue. |
USE OF
NON-GAAP FINANCIAL MEASURES 16
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, Adjusted net income
attributable to TWC shareholders, Adjusted Diluted EPS and Free Cash Flow, which the Company
defines as follows:
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 Companys business because they eliminate the effects of (i) considerable amounts of
noncash depreciation and amortization and (ii) items not within the control of the Companys
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 Companys annual incentive compensation programs. Adjusted net income
attributable to TWC shareholders and Adjusted Diluted EPS are considered important indicators of the
operational strength of the Company as these measures eliminate amounts that do not reflect the
fundamental performance of the Company. The Company utilizes Adjusted Diluted EPS, among other
measures, to evaluate its performance both on an absolute basis and relative to its peers and the broader market. Management believes that Free Cash Flow is an important indicator of the
Companys 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
Companys 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 Companys equity investments and
other non-operational income or expense. Additionally, Adjusted net income attributable to TWC
shareholders and Adjusted Diluted EPS do not reflect certain charges that affect the operating results
of the Company and they involve judgment as to whether items affect fundamental operating
performance. 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 Companys 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.
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
OIBDA (Operating Income before Depreciation and Amortization)
means Operating Income before depreciation of tangible assets and
amortization of intangible assets. Adjusted
net
income
attributable
to
TWC
shareholders
means
net
income
attributable
to
TWC
shareholders
(as
defined
under
GAAP)
excluding
the
impact,
if
any,
of
noncash
impairments of
goodwill,
intangible
and
fixed
assets
and
investments;
gains
and
losses
on
asset
sales;
merger-related
and
restructuring
costs;
changes
in
the
Companys
equity
award
reimbursement
obligation
to
Time
Warner;
certain
changes
to
income
tax
provision;
and
costs
associated
with
certain
equity
awards
granted
to
employees
to
offset
value
lost
as
a
result
of
the
Separation; as
well
as
the
impact
of
taxes
on
the
above
items.
Similarly,
Adjusted
Diluted
EPS
means
net
income
per
diluted
common
share
attributable
to
TWC
common
shareholders
excluding
the
above
items.
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;
costs
associated
with
certain
equity
awards
granted
to
employees
to
offset
value
lost
as
a
result
of
TWCs
separation
from
Time
Warner
Inc.
on
March
12,
2009
(the
Separation);
and, in
2014,
expenses
associated
with
unsolicited
proposals
to
acquire
the
Company. |
17
2013
2012
2013
2012
Adjusted OIBDA
2,026
$
1,994
$
7,980
$
7,824
$
Merger-related and restructuring costs
(38)
(17)
(119)
(115)
Depreciation
(784)
(777)
(3,155)
(3,154)
Amortization
(31)
(31)
(126)
(110)
Operating Income
1,173
$
1,169
$
4,580
$
4,445
$
Total revenue
5,577
$
5,485
$
22,120
$
21,386
$
Adjusted OIBDA as a percentage of revenue
36.3%
36.4%
36.1%
36.6%
Operating Income as a percentage of revenue
21.0%
21.3%
20.7%
20.8%
Net income per diluted common share attributable to TWC common shareholders
1.89
$
1.68
$
6.70
$
6.90
$
Merger-related and restructuring costs
0.09
0.03
0.25
0.22
Asset impairments
-
-
-
0.02
Gains on asset sales
-
-
-
(1.11)
Loss on equity award reimbursement obligation to Time Warner Inc.
-
0.01
0.02
0.02
Certain changes to income tax provision
(0.16)
(0.15)
(0.36)
(0.30)
Adjusted Diluted EPS
1.82
$
1.57
$
6.61
$
5.75
$
Items Affecting Comparability:
Merger-related and restructuring costs
(38)
$
(17)
$
(119)
$
(115)
$
Asset impairments
-
-
-
(12)
Gains on asset sales
-
-
-
494
Loss on equity award reimbursement obligation to Time Warner Inc.
(2)
(4)
(10)
(9)
Total of above items affecting comparability
(40)
(21)
(129)
358
Income tax impact of above items
15
8
50
(95)
Certain changes to income tax provision
45
47
104
95
Impact of items affecting comparability on net income attributable to TWC
shareholders 20
$
34
$
25
$
358
$
Net income attributable to TWC shareholders
540
$
513
$
1,954
$
2,155
$
Impact of items affecting comparability on net income attributable to TWC shareholders
(20)
(34)
(25)
(358)
Adjusted net income attributable to TWC shareholders
520
$
479
$
1,929
$
1,797
$
Cash provided by operating activities
1,599
$
1,410
$
5,753
$
5,525
$
Add:
Income taxes paid on investment sales
-
84
-
84
Excess tax benefit from equity-based compensation
12
8
93
81
Less:
Capital expenditures
(827)
(904)
(3,198)
(3,095)
Cash paid for other intangible assets
(10)
(10)
(40)
(37)
Other
(1)
(1)
(2)
(6)
Free Cash Flow
773
$
587
$
2,606
$
2,552
$
2011
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
Cash provided by operating activities
1,344
$
1,383
$
1,537
$
1,195
$
1,410
$
1,394
$
1,551
$
1,209
$
1,599
$
Add:
Income taxes paid on investment sales
-
-
-
-
84
-
-
-
-
Excess tax benefit from equity-based compensation
2
52
8
13
8
49
17
15
12
Less:
Capital expenditures
(942)
(706)
(712)
(773)
(904)
(770)
(827)
(774)
(827)
Cash paid for other intangible assets
(11)
(9)
(7)
(11)
(10)
(12)
(8)
(10)
(10)
Other
(2)
(2)
(2)
(1)
(1)
-
(1)
-
(1)
Free Cash Flow
391
$
718
$
824
$
423
$
587
$
661
$
732
$
440
$
773
$
Reconciliation of Cash provided by operating activities to Free Cash Flow (in millions):
2012
2013
4th Quarter
Full Year
Reconciliation of Net income attributable to TWC shareholders to Adjusted net income
attributable to TWC shareholders (in millions): Reconciliation of Net income per diluted
common share attributable to TWC common shareholders to Adjusted Diluted EPS:
Reconciliation of Adjusted OIBDA to Operating Income (in millions):
Adjusted OIBDA and Operating Income as percentages of revenue (in millions):
Reconciliation of Cash provided by operating activities to Free Cash Flow (in millions):
Reconciliations |