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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2005

OR

For the transition period from                      to                     

Commission File Number 0-30218

TIME WARNER TELECOM INC.

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code: (303) 566-1000

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x      No ¨

The number of shares outstanding of Time Warner Telecom Inc.’s common stock as of April 30, 2005 was:

Time Warner Telecom Inc. Class A common stock — 50,151,180 shares

Time Warner Telecom Inc. Class B common stock — 65,936,658 shares

INDEX TO FORM 10-Q

TIME WARNER TELECOM INC.

CONSOLIDATED AND CONDENSED BALANCE SHEET

1

TIME WARNER TELECOM INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes.

2

TIME WARNER TELECOM INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes.

3

TIME WARNER TELECOM INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2005

(Unaudited)

See accompanying notes.

4

TIME WARNER TELECOM INC.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

March 31, 2005

(unaudited)

Description of Business and Capital Structure

Time Warner Telecom Inc. (the “Company”), a Delaware corporation, is a leading provider of managed network solutions to business customers in 44 metropolitan markets in the United States. The Company delivers data, dedicated Internet access, and local and long distance voice services.

The Company has two classes of common stock outstanding, Class A common stock and Class B common stock. Holders of Class A common stock have one vote per share and holders of Class B common stock have ten votes per share. Each share of Class B common stock is convertible, at the option of the holder, into one share of Class A common stock. The Class B common stock is collectively owned directly or indirectly by Time Warner Inc. (“Time Warner”) and Advance Telecom Holdings Corporation and Newhouse Telecom Holdings Corporation (“Advance/Newhouse”). Time Warner and Advance/Newhouse are referred to as the “Class B Stockholders.” Holders of Class A common stock and Class B common stock generally vote together as a single class. However, some matters require the approval of 100% of the holders of the Class B common stock voting separately as a class, and some matters require the approval of a majority of the holders of the Class A common stock, voting separately as a class. As of March 31, 2005, the Class B Stockholders had approximately 93% of the combined voting power of the outstanding common stock and were represented by five members of the Board of Directors.

The Company also is authorized to issue shares of Preferred Stock. The Company’s Board of Directors has the authority to establish voting powers, preferences, and special rights for the Preferred Stock. No such voting powers, preferences, or special rights have been established and no shares of Preferred Stock have been issued as of March 31, 2005.

Basis of Presentation

The accompanying interim consolidated and condensed financial statements are unaudited, but in the opinion of management, reflect all adjustments necessary for a fair presentation of the results for the periods indicated. The results of operations for any interim period are not necessarily indicative of results for the full year. The accompanying financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2004.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Basis of Consolidation

The consolidated and condensed financial statements include the accounts of the Company and all entities in which the Company has a controlling voting interest (“subsidiaries”). Intercompany accounts and transactions have been eliminated in consolidation. Significant accounts and transactions with Class B Stockholders and its affiliates are disclosed as related party transactions.

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NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS - continued

Investments

Marketable equity securities held by the Company are classified as available-for-sale. Accordingly, marketable equity securities are included in other assets at fair value. Unrealized gains and losses on equity securities classified as available-for-sale are carried, net of taxes, as a component of accumulated other comprehensive income in stockholders’ equity until the investment is sold or considered impaired, at which time the realized gain or loss is included in income. Other equity investments which are not publicly traded and in which the Company’s ownership interest is less than 20% are generally carried at the lower of cost or net realizable value. Realized gains and losses are determined on a specific identification basis. As of December 31, 2004, the Company had sold its remaining marketable equity securities.

Marketable debt securities are classified as held-to-maturity as the Company has the intent and ability to hold the securities to maturity. Held-to-maturity securities are carried at amortized cost. The fair value of marketable debt securities is not materially different than the amortized cost.

Receivables

The Company generally bills in advance for the majority of the services it provides and does not require significant collateral from its customers. The Company evaluates whether receivables are reasonably assured of collection by ongoing credit evaluations of significant customers’ financial condition, and provides an allowance for doubtful accounts based on the expected collectability of all receivables. The allowance for doubtful accounts was $10.9 million, or 21% of gross receivables, as of March 31, 2005, compared to $11.4 million, or 20% of gross receivables, as of December 31, 2004.

Revenue

The Company’s revenue is derived primarily from business communications services, including dedicated transport, Ethernet, local switched, long distance, data and Internet access services, and intercarrier compensation, which is comprised of reciprocal compensation and switched access services. The Company’s customers are principally data and telecommunications-intensive businesses, long distance carriers, Internet service providers (“ISPs”), wireless communications companies, incumbent local exchange carriers (“ILECs”), competitive local exchange carriers (“CLECs”), and governmental entities.

Revenue for dedicated transport, data, Internet, and the majority of switched services is generally billed in advance on a fixed rate basis and recognized over the period the services are provided. Revenue for the majority of switched access services and long distance is generally billed on a transactional basis determined by customer usage with some fixed rate elements. The transactional elements of switched services are billed in arrears and estimates are used to recognize revenue in the period earned.

The Company evaluates whether receivables are reasonably assured of collection based on certain factors, including the likelihood of billing being disputed by customers. In situations where a dispute is likely, revenue is not recognized until cash is collected.

Reciprocal compensation is an element of intercarrier compensation revenue that represents compensation from local exchange carriers (“LECs”) for local exchange traffic originated on another LEC’s facilities and terminated on the Company’s facilities. Reciprocal compensation rates are established between the parties based on federal and state regulatory rulings. The Company recognizes reciprocal compensation revenue primarily on a cash basis except in those cases where the revenue is under dispute or at risk, in which case the Company defers recognition of the revenue until the outstanding issues are resolved. The Company utilizes the cash basis because changes in, and interpretations of, regulatory rulings create disputes and often result in significant delays in payments. Reciprocal compensation represented 2% and 3% of revenue during the three months ended March 31, 2005 and 2004, respectively.

Switched access is also an element of intercarrier compensation revenue and represents the connection between a long distance carrier’s point of presence and an end-user’s premises provided through

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NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS - continued

the Company’s switching facilities. The Federal Communications Commission (“FCC”) regulates interstate access rates, and through regulations and regulatory developments these rates have been reduced to parity with the ILEC rates competing in each service area. Switched access is billed in arrears and estimates are used to recognize revenue in the period earned. Switched access revenue represented 3% and 4% of revenue for the three months ended March 31, 2005 and 2004, respectively.

Significant Customers

The Company has substantial business relationships with a few large customers, including major long distance carriers. The Company’s top 10 customers accounted for 32% and 34% of the Company’s consolidated revenue for the three months ended March 31, 2005 and 2004, respectively. AT&T Corp. and MCI, Inc. are two of the Company’s largest customers at 8% and 4% of revenue, respectively, for the quarter ended March 31, 2005. The announced merger of AT&T Corp. and SBC Communications Inc. and the Verizon Communications purchase of MCI Inc., if consummated, may result in AT&T buying less local transport services from the Company in SBC’s service area in the long term, and MCI buying less local transport services from the Company in Verizon’s service area. No customer accounted for 10% or more of total revenue in the three months ended March 31, 2005 or 2004.

Income Taxes

As of March 31, 2005, the Company has recorded a deferred tax asset of $58.8 million, net of a valuation allowance of $247 million. The Company has concluded that it is more likely than not that the net deferred tax asset of $58.8 million will be realized because the Company could utilize tax-planning strategies in the event its net operating losses were to expire. However, the Company believes there may be risks in realizing amounts in excess of the $58.8 million through utilization of available tax planning strategies and therefore has established a valuation allowance.

Asset Retirement Obligations

Effective January 1, 2003, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Statement No. 143, Accounting for Asset Retirement Obligations (“SFAS 143”). SFAS 143 requires that the estimated fair value of an asset retirement obligation be recorded when incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and depreciated over the asset’s estimated useful life. The Company has asset retirement obligations related to decommissioning of electronics in leased facilities and the removal of certain fiber and conduit systems. Considerable management judgment is required in estimating these obligations. Important assumptions include estimates of retirement costs, the timing of the future retirement activities, and the likelihood of retirement provisions being enforced. Changes in these assumptions based on future information could result in adjustments to estimated liabilities.

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NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS - continued

In conjunction with the adoption of SFAS 143, the Company recorded a $5.9 million liability, an asset of $2.9 million in property, plant, and equipment, and a $3.0 million charge to earnings to account for the cumulative effect of the depreciation and accretion expense that would have been recorded had SFAS 143 been in effect in earlier periods. The asset retirement obligation increased primarily due to the accretion of the liability and was $7.7 million and $7.5 million as of March 31, 2005 and December 31, 2004, respectively.

Segment Reporting

The Company operates in 44 service areas, and the Company’s management makes decisions on resource allocation and assesses performance based on total revenue, expenses, and capital spending of these operating locations. Each of the service areas offer similar products and services, has similar customers and networks, is regulated by the same type of authorities, and is managed directly by the Company’s executives, allowing the 44 service areas to be aggregated, resulting in one line of business.

Loss Per Common Share and Potential Common Share

The Company computes loss per common share in accordance with the provisions of FASB Statement No. 128, Earnings Per Share, which requires companies with complex capital structures to present basic and diluted earnings per share (“EPS”). Basic EPS is measured as the income or loss available to common stockholders divided by the weighted average outstanding common shares for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, stock options, etc.) as if they had been converted at the beginning of the periods presented. Potential common shares that have an anti-dilutive effect (e.g., those that increase income per share or decrease loss per share) are excluded from diluted EPS.

Basic loss per share for all periods presented herein was computed by dividing the net loss by the weighted average shares outstanding for the period.

The diluted loss per common share for all periods presented was computed by dividing the net loss attributable to common shares by the weighted average outstanding common shares for the period. Options to purchase 19.5 million and 19.4 million shares of the Company’s Class A common stock outstanding at March 31, 2005 and 2004, respectively, were excluded from the computation of weighted average shares outstanding because their inclusion would be anti-dilutive.

Stock-Based Compensation

The Company follows SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), which allows companies to either expense the estimated fair value of options or continue to follow the intrinsic value method set forth in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and disclose the pro-forma effect on net income (loss) as if the fair value of the options had been expensed.

To determine the pro-forma effect, the fair value of options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 4.2% and 2.8% in the three months ended March 31, 2005 and 2004, respectively; dividend yield of 0% during each period; volatility factor of the expected market price of the Company’s common stock of 1.10 and 1.16 as of March 31, 2005 and 2004, respectively; and a weighted-average expected life of the option of five years during each period.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price characteristics significantly different from those of traded options. Because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s employee stock options.

8

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NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS - continued

The weighted-average fair value of options granted was $2.81 and $5.81 for the three months ended March 31, 2005 and 2004, respectively. For purposes of pro-forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro-forma net loss and pro-forma net loss per share, under the accounting provisions of SFAS 123, are shown below:

In December 2004, the FASB issued Statement No. 123R, Share-Based Payments (“SFAS 123R”). The statement is effective for the Company as of January 1, 2006 and requires recognition of compensation cost in the statement of operations for all share-based payments (including employee stock options) at fair value. SFAS 123R applies to all future grants, as well as the unvested portion of existing grants as of December 31, 2005.

The Company’s stock option expense under SFAS 123, as disclosed above in the pro-forma disclosure, has a significant pro-forma impact on its results of operations and has been impacted by the high volatility of the Company’s stock price. As a result, the Company believes that application of the provisions of SFAS 123R is expected to have a significant impact to reported net income (loss) and earnings (loss) per share.

Reclassifications

Certain prior period amounts have been reclassified for comparability with the 2005 presentation.

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NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS - continued

Long-term debt and capital lease obligations are summarized as follows:

As of December 31, 2004, the Company had outstanding $400 million principal amount 9¾% Senior Notes due July 2008 (the “9¾% Senior Notes”). On March 11, 2005, the Company redeemed $200 million of the 9¾% Senior Notes. Interest on the remaining 9¾% Senior Notes is payable semi-annually on January 15 and July 15. The 9¾% Senior Notes are unsecured, unsubordinated obligations of the Company. Interest expense, including amortization and write-off of $2.1 million deferred debt issue costs and the premium of $6.5 million paid on the early redemption of $200 million of the 9¾% Senior Notes in March 2005, totaled approximately $17.6 million and $10.1 million for the three months ended March 31, 2005 and 2004, respectively. At March 31, 2005, the fair market value of the remaining $200 million 9¾% Senior Notes was approximately $198 million.

The $400 million principal amount 10 ¹/8% Senior Notes due February 2011 (the “10 ¹/8% Senior Notes”) are unsecured, unsubordinated obligations of the Company. Interest on the 10 ¹/8% Senior Notes is payable semi-annually on February 1 and August 1. Interest expense, including amortization of deferred debt issue costs, relating to the 10 ¹/8% Senior Notes totaled approximately $10.4 million for each of the three months ended March 31, 2005 and 2004. At March 31, 2005, the fair market value of the $400 million of 10 ¹/8% Senior Notes was approximately $389 million.

The $240 million principal amount of Second Priority Senior Secured Floating Rate Notes due February 2011 (the “2011 Notes”) are secured obligations, on a second lien basis, of the Company’s wholly owned subsidiary Time Warner Telecom Holdings Inc. (“Holdings”). The 2011 Notes are guaranteed by the Company and its subsidiaries and Holdings’ subsidiaries. The amount of guarantee attributable to any one subsidiary is subject to a maximum that is equivalent to 20% of the outstanding principal balance of the 2011 Notes. Interest is computed based on a specified LIBOR rate plus 4.0% and is reset and payable quarterly. Based on the LIBOR rate in effect as of March 31, 2005, the rate was 6.79% and interest expense including amortization of deferred debt issuance costs was $4.3 million and $1.5 million for the three months ended March 31, 2005 and 2004, respectively. At March 31, 2005, the fair market value of the $240 million of 2011 Notes was approximately $244 million.

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NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS - continued

As of December 31, 2004, Holdings had outstanding $200 million principal amount of 9¼% Senior Notes due February 2014 (the “2014 Notes”). On February 9, 2005, Holdings issued an additional $200 million of 2014 Notes at a premium of 100.25%. The 2014 Notes are unsecured, unsubordinated obligations of Holdings and are subject to similar guarantees as the 2011 Notes, except that the guarantees are unsecured. The notes are guaranteed by the Company and its subsidiaries and Holdings’ subsidiaries. Interest is payable semi-annually on February 15 and August 15. Interest expense, including amortization of deferred debt issuance costs and premium, relating to the 2014 Notes was $7.4 million and $2.2 million for the three months ended March 31, 2005 and 2004, respectively. At March 31, 2005, the fair market value the 2014 Notes was approximately $389 million.

None of the above described notes has been listed on any securities exchange or inter-dealer automated quotation system, and the estimated market values are based on indicative pricing published by investment banks. While the Company believes these approximations to be reasonably accurate at the time published, indicative pricing can vary widely depending on volume traded by any given investment bank and other factors.

The Company has a $150 million revolving credit facility (the “Revolver”) that is fully available on a revolving basis and expires on February 20, 2009, or April 14, 2008, if any 9¾% Senior Notes remain outstanding on that date. Holdings is the borrower under the facility and the Company and its subsidiaries and Holdings’ subsidiaries are guarantors. Interest is calculated based on a specified Eurodollar rate plus 2¼% to 3%. If the Revolver were drawn, certain restrictive financial covenants would apply. The Company is required to pay commitment fees on a quarterly basis of 0.5% per annum on the undrawn available commitment of the Revolver. Commitment fee expense was $187,500 for the three months ended March 31, 2005 and $498,000 for the three months ended March 31, 2004, including $415,000 of expense related to a terminated credit facility, and has been classified as a component of interest expense in the accompanying consolidated statements of operations.

The Senior Notes are governed by indentures that contain certain restrictive covenants. These restrictions affect, and in many respects significantly limit or prohibit, among other things, the ability of the Company to incur indebtedness, make prepayments of certain indebtedness, pay dividends, make investments, engage in transactions with stockholders and affiliates, issue capital stock of subsidiaries, create liens, sell assets, and engage in mergers and consolidations. The credit agreement for the Revolver contains similar restrictions, as well as certain financial covenants that the Company must comply with if it draws on the facility.

As of March 31, 2005, the Company was in compliance with all of its covenants.

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NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS - continued

In the normal course of business, the Company engages in various transactions with affiliates of the Class B Stockholders, generally on negotiated terms among the numerous affected operating units that, in management’s view, result in reasonable arms-length terms.

The Company benefits from its relationship with Time Warner Cable, an affiliate of Time Warner, both through access to local rights-of-way and construction cost sharing. The Company has similar arrangements with Bright House Networks, LLC (“Bright House”), an affiliate of Advance/Newhouse, which manages certain cable systems in Florida and Indiana. Twenty-three of the Company’s 44 markets use fiber capacity licensed from Time Warner Cable or Bright House (the “Cable Operations”.) Under the terms of those agreements, if the Company wishes to license fiber capacity in addition to the capacity initially licensed in 1998, the Company must pay the Cable Operations an amount equal to the Company’s allocable share of the total cost of constructing the route in question, plus permitting and supervision fees as a license fee. The Company generally pays the license fee at the time the network is constructed. Under those agreements, the Company licenses discrete fibers and attaches its own electronics so that the Company’s networks are functionally separate from the licensor’s. Pursuant to the licensing arrangements, the Company paid the Cable Operations $1.4 million and $1.1 million for the three months ended March 31, 2005 and 2004, respectively. These fees are capitalized to property, plant, and equipment and amortized over their useful lives as depreciation and amortization expense. As of March 31, 2005, the Company’s property, plant, and equipment included $188.9 million in payments for licenses of fiber capacity pursuant to the capacity license agreements.

Under the licensing arrangement, the Company reimburses the Cable Operations for facility maintenance and pole and conduit rental costs. The reimbursements to the Cable Operations aggregated $1.4 and $1.1 million for the three months ended March 31, 2005 and 2004, respectively, and are a component of operating expenses in the consolidated statements of operations. In certain cases, the Company’s operations are co-located with the Cable Operations facilities and are allocated a charge for various overhead expenses. Under the terms of leases and subleases between the Company and the Cable Operations, allocations for rent from the Cable Operations are typically based on square footage and allocations for utility charges are based on actual usage. These charges aggregated $882,000 and $590,000 from the Cable Operations for the three months ended March 31, 2005 and 2004, respectively, and are a component of selling, general, and administrative expenses in the consolidated statements of operations. The charges by these affiliates for rent and utilities do not differ materially from charges the Company incurs in locations where the Company leases spaces from unaffiliated parties.

Affiliates of the Class B Stockholders purchase services from the Company. Revenue from these affiliates, which includes dedicated transport services, switched services, and data and Internet services, aggregated $4.3 million and $5.6 million for the three months ended March 31, 2005 and 2004, respectively.

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NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS - continued

Pending legal proceedings are substantially limited to litigation incidental to the business of the Company. In the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial statements.

Management routinely reviews the Company’s exposure to liabilities incurred in the normal course of its business operations. Where a probable contingency exists and the amount can be reasonably estimated, the Company records the estimated liability. Considerable judgment is required in analyzing and recording such liabilities and actual results could vary significantly from the estimates.

On February 20, 2004, Holdings (“Issuer”) issued $440 million in Senior Notes consisting of $240 million principal amount of 2011 Notes, and $200 million principal amount of 2014 Notes. On February 9, 2005, Holdings issued an additional $200 million of 2014 Notes. These notes are guaranteed by the Company (“Parent Guarantor”) and its subsidiaries and Holdings’ subsidiaries (“Combined Subsidiary Guarantors”). The guarantees are joint and several. A significant amount of the Issuer’s cash flow is generated by the Combined Subsidiary Guarantors. As a result, funds necessary to meet the Issuer’s debt service obligations are provided in large part by distributions or advances from the Combined Subsidiary Guarantors. Under certain circumstances, contractual and legal restrictions, as well as the Company’s financial condition and operating requirements and those of the Company’s subsidiaries, could limit the Issuer’s ability to obtain cash for the purpose of meeting its debt service obligations, including the payment of principal and interest on the 2011 and 2014 Notes.

The following information sets forth the Company’s Condensed Consolidating Balance Sheets as of March 31, 2005 and December 31, 2004, Condensed Consolidating Statements of Operations for the three months ended March 31, 2005 and 2004, and Condensed Consolidating Statements of Cash Flows for the three months ended March 31, 2005 and 2004.

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TIME WARNER TELECOM INC.

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2005

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TIME WARNER TELECOM INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2004

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TIME WARNER TELECOM INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended March 31, 2005

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TIME WARNER TELECOM INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended March 31, 2004