DEFA14A

 

 

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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¨   Preliminary Proxy Statement
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¨   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)

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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
Today’s 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 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.
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 Company’s
earnings release for the quarter ended December 31, 2013, which can also be accessed from the Company’s 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
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.
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.
TWC’s 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, TWC’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 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.  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
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.  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 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.
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
Company’s
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
TWC’s
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