AOL Time Warner First Quarter EBITDA Climbs 20% T0 $2.1 Billion and Cash EPS Rises 21% to $0.23 On Total Revenues of $9.1 Billion.Business Editors NEW YORK--(BUSINESS WIRE)--April 18, 2001 Free Cash Flow Increases Over 400% to $651 Million Time Warner Cable This article or section needs sources or references that appear in reliable, third-party publications. Alone, primary sources and sources affiliated with the subject of this article are not sufficient for an accurate encyclopedia article. Digital Subscriptions Grow 213% Year-Over-Year to 3.3 Million; AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services. Service Adds Over 2 Million New Members in the Quarter AOL Advertising and Commerce Revenues Climb 37% to $721 Million AOL Time Warner Inc. (NYSE NYSE See: New York Stock Exchange : AOL) today reported results for its first quarter ended March 31, 2001, posting strong gains in total revenues, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become , cash earnings per share, and Free Cash Flow over pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma results from last year's comparable quarter. Total revenues rose 9% to $9.1 billion, compared to $8.3 billion in the 2000 first quarter. Excluding one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. events, EBITDA increased 20% to $2.1 billion, from $1.8 billion in the corresponding 2000 quarter; cash earnings per common share were $0.23, versus $0.19 in last year's first quarter; and Free Cash Flow climbed to $651 million, up 409% from the year-ago quarter's $128 million. Revenue growth was driven by a 9% increase in subscription revenues to $3.9 billion, a 10% increase in advertising and commerce revenues to $2.1 billion, and an 8% increase in content and other revenues to $3.2 billion. This compares to $3.5 billion, $1.9 billion and $2.9 billion respectively in last year's March quarter. The Company's reported net loss, including merger-related expenses and pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $620 million reflecting the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of certain investments in the AOL Time Warner investment portfolio, was $1.4 billion, or $0.31 per share. On the same basis in the year-ago quarter, the Company's reported net loss, including one-time events, was $1.5 billion, or $0.34 per share. In addition, the quarter's specific highlights include: -- Time Warner's digital media results have been allocated to the business segments now responsible for managing those operations and are no longer treated as a separate reportable business segment; -- Income and losses related to equity-method investments and gains and losses on the sale of investments have been reclassified from EBITDA and operating income (loss) to other income (expense), net, to better reflect the core operations of the business segments; -- Corporate expenses have been reclassified to selling, general and administrative costs as a reduction of EBITDA and operating income (loss); and -- Merger-related costs have been moved from other income (expense), net, to EBITDA and operating income (loss). The schedules below reflect AOL Time Warner's performance for the March quarter (in millions):
Adjusted(1) Reported
-------- --------
Actual Pro Forma Actual Pro Forma
2001 2000 2001 2000
---- ---- ---- ----
Revenues:
AOL $2,125 $1,814 $2,125 $1,814
Cable 1,625 1,447 1,625 1,447
Filmed Entertainment 2,212 1,896 2,212 1,896
Networks 1,699 1,610 1,699 1,610
Music 881 934 881 934
Publishing 966 939 966 939
Intersegment Eliminations (428) (324) (428) (324)
------ ------ ----- ------
Total Revenues $9,080 $8,316 $9,080 $8,316
-------------- ====== ====== ====== ======
EBITDA:
AOL $ 684 $ 506 $ 684 $ 506
Cable 768 666 768 694
Filmed Entertainment 113 185 113 185
Networks 449 335 449 335
Music 94 101 94 101
Publishing 113 94 113 94
Corporate (74) (84) (74) (84)
Merger-related costs - - (71) (46)
Intersegment Eliminations (1) (8) (1) (8)
------ ------ ------ ------
Total EBITDA $2,146 $1,795 $2,075 $1,777
------------ ====== ====== ====== ======
(1) In order to enhance comparability, results have been adjusted to
exclude the effects of certain transactions and nonrecurring
items, as described more fully in the accompanying notes.
Strong Quarter Builds Foundation for Future Growth Jerry Jer·ry n. pl. Jer·ries Chiefly British Slang A German, especially a German soldier. [Alteration of German. Levin lev·in n. Archaic Lightning. [Middle English levene, levin; see leuk- in Indo-European roots.] , Chief Executive Officer, said: "We couldn't could·n't Contraction of could not. couldn't could not be more pleased with AOL Time Warner's performance in our first quarter as a new Company. Our results met or exceeded all key operating and financial targets. This outstanding quarter underscores the unique promise of AOL Time Warner, and the ability of our management team to collaborate in a focused, disciplined way. And this is just the beginning. "Our businesses are working together as one, unified organization to deliver shareholder value over the near- and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. . We're we're Contraction of we are. we're we are aggressively rolling out next-generation products and services that will fuel continued growth momentum in our subscription and advertising and commerce businesses. And we're continuing to develop high-quality entertainment that expands our immensely valuable film, video and music libraries. At the same time, we're laying the groundwork for truly transformational businesses like digital music, interactive television and broadband services See broadband and broadband service provider. ." Cross-Company Initiatives During the quarter, AOL Time Warner moved quickly to implement a broad range of cross-company initiatives to take advantage of synergies and create new growth opportunities. These included: -- Time Warner's digital media results have been allocated to the business segments now responsible for managing those operations and are no longer treated as a separate reportable business segment; -- Income and losses related to equity-method investments and gains and losses on the sale of investments have been reclassified from EBITDA and operating income (loss) to other income (expense), net, to better reflect the core operations of the business segments; -- Corporate expenses have been reclassified to selling, general and administrative costs as a reduction of EBITDA and operating income (loss); and -- Merger-related costs have been moved from other income (expense), net, to EBITDA and operating income (loss). Just after the quarter closed, AOL and Warner Music Group Warner Music Group (WMG) is one of the four major record labels. Warner Music Group also has a publishing arm, Warner/Chappell Music, which dates back to 1929, when Jack Warner, president of Warner Bros. Pictures Inc. joined with Bertelsmann For the foundation, see . Bertelsmann AG is a transnational media corporation founded in 1835, based in Gütersloh, Germany. The company operates in 63 countries and employs over 100,000 workers (as of June 30, 2007). In 2006 the company reported a € 19. , EMI (ElectroMagnetic Interference) An electrical disturbance in a system due to natural phenomena, low-frequency waves from electromechanical devices or high-frequency waves (RFI) from chips and other electronic devices. Allowable limits are governed by the FCC. and RealNetworks (RealNetworks, Inc., Seattle, WA, www.realnetworks.com) The company behind the RealMedia and the RealPlayer technologies. Originally Progressive Networks, product names have a Real prefix (RealPlayer, RealOne, RealArcade, RealAudio, etc.). See RealMedia. to announce the development of MusicNet, a groundbreaking platform for online music subscription services scheduled to roll out later this year on America Online See AOL. brands and other distribution networks. America Online For the first quarter, America Online reported records in revenues, advertising and commerce revenues, and EBITDA, as well as strong AOL membership growth. Revenues climbed to $2.1 billion, up 17% from $1.8 billion in the year-ago quarter. Advertising and commerce reached a record $721 million, climbing 37% over last year's March quarter and 5% ahead of the December December: see month. quarter of 2000. EBITDA improved 35% to $684 million. In addition to strong performance in the US, AOL subscription growth included especially strong gains in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . In
the US, average daily usage per AOL member continued to grow, reaching
almost 70 minutes, compared to 64 minutes in the year-ago quarter. And
the CompuServe An online information service that provides access to the Internet, e-mail, instant messaging and an integrated contact list. Founded in 1969 as a timesharing service, CompuServe is one of the oldest online services, being the first to offer e-mail in 1979 and online chat a year later. 2000 service added 286,000 members, giving CompuServe a
total membership of more than 3 million at the end of the quarter.
America Online launched several new AOL Anywhere initiatives -- including the addition of Digital City and Moviefone to its AOLbyPHONE service; the AOL Alerts service that notifies members through their text-enabled digital cell phones or alphanumeric alphanumeric (ăl'fən mĕr`ĭk) or alphameric (ăl'fəmĕr`ĭk), the set of letters and numbers. pagers when they
receive AOL e-mail; and a content and marketing agreement that offers
America Online's popular features and services to customers as part
of VoiceStream's high-speed wireless Internet InternetPublicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the service. A major strategic alliance with Ticketmaster will provide greater access to information as well as event and movie ticketing through a new "AOL Box Office by Ticketmaster" service across all of America Online's brands, and an alliance between AOL Moviefone and Movietickets.com will provide moviegoers with the most comprehensive Internet destinations for purchasing movie tickets. Cable During the March quarter, Cable's revenues climbed 12% year-over-year to $1.6 billion. Subscription revenue grew 12% to $1.5 billion, and advertising and commerce revenues rose 17% to $117 million. EBITDA grew 15% to $768 million. Cable ended the quarter with 12.8 million basic cable subscribers. Cable's double-digit EBITDA growth reflects its continued aggressive deployment of next-generation technologies. During the quarter, Cable added 400,000 digital subscribers for a total of 2.1 million, and 237,000 high-speed Road Runner road runner: see cuckoo. Road Runner thrives on outwitting Wile E. Coyote. [Comics: “Beep Beep the Road Runner” in Horn, 105] See : Cunning Road Runner subscribers for a total of 1.2 million. The growth of the digital and high-speed Internet See broadband. subscriber base provides the platform from which additional value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. can be offered in the future. In addition to achieving strong growth in its digital cable and high-speed modem subscriptions, Cable continued testing multiple high-speed ISPs in Columbus, Ohio Columbus is the capital and the largest city of the American state of Ohio. Named for explorer Christopher Columbus, the city was founded in 1812 at the confluence of the Scioto and Olentangy rivers, and assumed the functions of state capital in 1816. , with plans to launch across several systems in the second half of the year. And successful tests of Video on Demand services are underway in multiple markets, with Subscription Video on Demand tests scheduled to start in the coming months. These tests demonstrate future opportunities available to the cable business as it continues to expand its digital and broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). offerings. Filmed Entertainment For the quarter, Filmed Entertainment reported higher revenues, increasing to $2.2 billion, or 17% over the year-ago quarter. Filmed Entertainment group's EBITDA declined 39% to $113 million, primarily because of the number and timing of new releases and related marketing and distribution costs distribution costs distribute npl → Vertriebskosten pl , which were expensed as incurred under accounting rules adopted in the prior year. Primary contributors to Warner Bros BROS Brothers BROS Benefits and Retirement Operations Section (King County, Washington) BROS Barnes and Richmond Operatic Society (London, UK) .' domestic theatrical revenues were the domestic theatrical releases of Exit Wounds ($48 million to date) and See Spot Run ($33 million to date), as well as the continuing worldwide box office success of Miss Congeniality con·gen·ial adj. 1. Having the same tastes, habits, or temperament; sympathetic. 2. Of a pleasant disposition; friendly and sociable: a congenial host. 3. ($160 million to date). The results for television syndication See syndication format. were led by the second cycle availability of Seinfeld. Networks In the quarter, Networks' revenues climbed 6% to $1.7 billion, compared to $1.6 billion in the prior year's quarter, while its advertising and commerce revenues increased 1% to $589 million. EBITDA grew 34% to $449 million, up from the 2000 quarter's $335 million. During the quarter, TBS TBS Tablespoon TBS Tokyo Broadcasting System, Inc. TBS Treasury Board Secretariat (Canada) TBS Tris-Buffered Saline TBS Tris Buffered Saline TBS Turn Based Strategy (games) Superstation su·per·sta·tion n. A television or radio station that broadcasts to a nationwide audience by satellite, cable, or both. , TNT TNT: see trinitrotoluene. TNT in full trinitrotoluene Pale yellow, solid organic compound made by adding nitrate (−NO2) groups to toluene. and Cartoon Network For Cartoon Network outside of the United States, see . Cartoon Network is a cable television network created by Turner Broadcasting which primarily shows animated programming. all ranked in the top five basic cable networks in total day and primetime household ratings: -- TBS Superstation topped all basic cable networks in delivery of key adult demographics The attributes of people in a particular geographic area. Used for marketing purposes, population, ethnic origins, religion, spoken language, income and age range are examples of demographic data. and targeted male demographics, with 4 of basic cable's top 5 theatrical movie presentations and basic cable's top-rated original series (excluding sports), Ripley's Believe it or Not. -- TNT achieved its best-ever quarter in total day delivery of adults 18 to 49 (scoring a 30% increase year-over-year) and 25 to 54 (a 27% increase), and its TNT original film Louis L'Amour's Crossfire A multi-GPU interface from ATI for connecting two ATI display adapters together for faster graphics rendering on one monitor. CrossFire machines require PCI Express slots, a CrossFire-enabled motherboard and, depending on which models are used, either a pair of ATI Radeon adapters or one Trail became the highest-rated movie, original or theatrical, in the history of basic cable. -- Cartoon Network experienced the largest gain in total day delivery of any ad-supported network, scoring double-digit increases among households and all key demographics to reach its highest first-quarter primetime rating and household delivery ever (1.2 million) -- finishing the quarter in fourth place among all advertising-supported cable networks. CNN/US reinforced its position as the #1 cable news network in the US, leading all 24-hour cable news networks in total viewers in both total day and primetime. CNN/US presented all top 5, as well as 34 of the top 50, most-watched cable news programs. In addition, CNN/US showcased its unrivaled ability to deliver breaking news coverage -- attracting more viewers than the cable news competition combined during the major news stories. During the quarter, HBO Hyperbaric oxygen therapy (HBO) A form of oxygen therapy in which the patient breathes oxygen in a pressurized chamber. Mentioned in: Ozone Therapy benefited from increased subscriber revenue, driven by continued subscriber growth. In addition, HBO announced an agreement with Universal Studios for films theatrically released from 2003 through 2010. And HBO original programming earned multiple honors, including an Oscar and four Golden Globe awards, and The Sopranos entered its third season to critical acclaim and record ratings. The WB continued to deliver double-digit growth in selected key demographics, maintaining its position as the #1 network among female teens. At the same time, Kids' WB Kids' WB is the Saturday morning cartoon block of The CW Television Network's weekend programming. The CW is the result of The WB merge with UPN in 2006. History Early years ! was again ranked as the #1 broadcast network for children aged 2 to 11 on Saturday mornings. Music Warner Music Group's quarterly revenues totaled $881 million, down 6% from the previous year's quarter. Approximately two-thirds of the decline was due to currency exchange. EBITDA declined 7% to $94 million. During the quarter, WMG WMG Warner Music Group WMG Wireless Messaging Gateway WMG Williams Media Group WMG Where's My Glasses? WMG Woah My God WMG Wireless Marketing Group WMG Wisconsin Musical Groups WMG Windows Metafile Graphics WMG Wireless Media Gateway embarked upon a worldwide restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). aimed at realigning the business in response to the changing marketplace and reducing the cost base. In addition, it made key management appointments including a new chief financial officer and a new head of the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. region. Top worldwide sellers for the quarter included Enya, Eric Clapton, Madonna, Linkin Park and LeAnn Rimes. Steely steel·y adj. steel·i·er, steel·i·est 1. Made of steel. 2. Resembling steel, as in color or hardness: steely eyes. Dan's Two Against Nature won four Grammys, including "Album of the Year," and Faith Hill's Grammy-winning album Breathe was certified See certification. six-times Platinum for US sales of more than 6 million units. Get Over Yourself, the first single from Eden's Crush Eden's Crush was a girl group based in Los Angeles created on the American television series Popstars which aired on The WB Television Network in early 2001. -- whose real-life experiences were chronicled on The WB's POPSTARS and promoted on the AOL service -- became the #1 selling single for two consecutive weeks, and the first female group to debut at #1 with their first single. Publishing Publishing's quarterly revenues climbed 3% to $966 million during the quarter compared to $939 million in last year's corresponding quarter. Advertising and commerce revenues increased 9% to $608 million. EBITDA rose 20%, to $113 million, over the year-ago March quarter's $94 million. The Company's women's magazines this is a list of women's magazines, magazines that have been published primarily for a readership of women. Currently published
About AOL Time Warner AOL Time Warner (NYSE: AOL) is the world's first Internet-powered media and communications company Communications Company is a communications unit of the United States Marine Corps. They are part of Combat Logistics Regiment 37 , 3rd Marine Logistics Group (3MLG) and III Marine Expeditionary Force (III MEF). The unit is based out of the Marine Corps Base Camp Smedley D. , whose industry-leading businesses include interactive services, cable systems, publishing, music, networks and filmed entertainment. The Company's earnings conference call can be heard live on the Internet at 9:00AM EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT on Wednesday, April 18. To listen to the call, visit http://www.aoltimewarner.com/investors or AOL Keyword: IR. Caution Concerning Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This document includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on management's current expectations and are naturally subject to uncertainty and changes in circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological and/or regulatory factors and factors affecting the integration of the businesses of Time Warner Inc. and America Online, Inc. More detailed information about those factors is set forth in filings by AOL Time Warner with the Securities and Exchange Commission, including its annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . AOL Time Warner 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.
AOL TIME WARNER INC.
BALANCE SHEET
(millions, except per share amounts)
(unaudited)
March 31, December 31,
2001 2000
Actual Pro Forma
------ ---------
ASSETS
Current assets
Cash and equivalents $ 1,268 $ 3,300
Short-term investments - 886
Receivables, less allowances of $1.732 and
$1.725 billion 4,957 6,033
Inventories 1,857 1,583
Prepaid expenses and other current assets 1,897 1,908
-------- --------
Total current assets 9,979 13,710
Noncurrent inventories and film costs 7,086 6,235
Investments, including available-for-sale
securities 11,564 9,472
Property, plant and equipment at cost, net 11,514 11,174
Music catalogues, contracts and copyrights 2,970 2,500
Cable television and sports franchises 27,796 31,700
Brands and trademarks 10,830 10,000
Goodwill and other intangible assets, net 127,907 128,927
Other assets 2,345 2,329
-------- --------
Total assets $211,991 $216,047
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,855 $ 2,125
Participations payable 1,201 1,190
Royalties and programming costs payable 1,447 1,488
Deferred revenue 1,779 1,660
Debt due within one year 17 45
Other current liabilities 6,378 6,163
-------- --------
Total current liabilities 12,677 12,671
Long-term debt 20,176 21,318
Deferred income taxes 13,127 15,165
Deferred revenue 1,224 1,277
Other liabilities 4,787 4,050
Minority interests 3,475 3,364
Mandatorily redeemable preferred securities of a
subsidiary holding solely debentures of a
subsidiary of the Company - 575
Shareholders' equity
Series LMCN-V common stock, $.01 par value,
171.2 million shares outstanding 2 2
Common stock, $.01 par value, 4.127 and
4.101 billion shares outstanding 41 41
Paid-in capital 156,018 155,796
Accumulated other comprehensive income, net 101 61
Retained earnings 363 1,727
-------- --------
Total shareholders' equity 156,525 157,627
-------- --------
Total liabilities and shareholders' equity $211,991 $216,047
======== ========
See accompanying notes.
AOL TIME WARNER INC.
STATEMENT OF OPERATIONS
Three Months Ended March 31,
(millions, except per share amounts)
(Unaudited)
2001 2000
Actual Pro Forma
------ ------
Revenues:
Subscriptions $3,857 $3,528
Advertising and commerce 2,053 1,865
Content and other 3,170 2,923
------ ------
Total revenues 9,080 8,316
Cost of revenues (5,010) (4,583)
Selling, general and administrative (2,371) (2,327)
Amortization of goodwill and other intangible assets (1,775) (1,752)
Gain on sale or exchange of cable television systems - 28
Merger-related costs (71) (46)
------ ------
Operating loss (147) (364)
Interest expense, net (319) (328)
Other income (expense), net (872) (104)
Minority interest (104) (55)
------ ------
Loss before income taxes and cumulative effect of
accounting change (1,442) (851)
Income tax benefit (provision) 73 (161)
------ ------
Loss before cumulative effect of accounting change (1,369) (1,012)
Cumulative effect of accounting change, net of $295
million income tax benefit - (443)
------ ------
Net loss (1,369) (1,455)
Preferred dividend requirements - (5)
------ ------
Net loss applicable to common shares $(1,369) $(1,460)
====== ======
Basic and diluted loss per common share before
cumulative effect of accounting change $(0.31) $(0.24)
Cumulative effect of accounting change - (0.10)
------ ------
Basic and diluted net loss per common share $(0.31) $(0.34)
====== ======
Diluted cash earnings per share $0.08 $ 0.20
====== ======
Basic common shares 4,412.7 4,250.3
====== ======
Diluted common shares for cash earnings per share 4,591.6 4,616.8
====== ======
See accompanying notes.
AOL TIME WARNER INC.
STATEMENT OF CASH FLOWS
Three Months Ended March 31,
(millions; unaudited)
2001 2000
Actual Pro Forma
-------- --------
OPERATIONS
Net loss $ (1,369) $ (1,455)
Adjustments for noncash and nonoperating items:
Cumulative effect of accounting change - 443
Depreciation and amortization 2,222 2,141
Amortization of film costs 626 500
Loss on writedown of investments 620 -
Gain on sale of investments (3) (297)
Gain on sale or exchange of cable systems
and investments - (28)
Equity in losses of investee companies
after distributions 221 417
Changes in operating assets and liabilities,
net of acquisitions (1,341) (812)
-------- --------
Cash provided by operations 976 909
-------- --------
INVESTING ACTIVITIES
Acquisition of Time Warner Inc. cash
and equivalents 690 -
Investments and acquisitions (973) (823)
Capital expenditures (906) (741)
Investment proceeds 1,649 474
Other - (16)
-------- --------
Cash provided (used) by investing activities 460 (1,106)
-------- --------
FINANCING ACTIVITIES
Borrowings 2,247 1,083
Debt repayments (4,091) (1,401)
Borrowings against future stock option proceeds - 2
Redemption of mandatorily redeemable preferred
securities of subsidiary (575) -
Proceeds from exercise of stock option and
dividend reimbursement plans 277 367
Repurchases of common stock (615) (65)
Dividends paid (4) (67)
Other (17) (20)
-------- --------
Cash used by financing activities (2,778) (101)
-------- --------
DECREASE IN CASH AND EQUIVALENTS (1,342) (298)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 2,610 3,838
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $1,268 $3,540
======== ========
See accompanying notes.
AOL TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge Note 1: Basis of Presentation Basis of Presentation On January 11, 2001, America Online, Inc. ("America Online") and Time Warner Inc. ("Time Warner") completed their previously announced merger. The combined company is named AOL Time Warner Inc. ("AOL Time Warner" or the "Company"). The financial statements of AOL Time Warner reflect the application of the purchase method of accounting. Under the purchase method of accounting, the estimated costs of approximately $147 billion to acquire Time Warner, including transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). , have been allocated to Time Warner's underlying net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. in proportion to their respective values. However, because the valuation of certain of Time Warner's underlying assets and liabilities continues to be refined, such allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as is subject to change. The 2000 pro forma financial statements Pro forma financial statements A firm's financial statements as adjusted to reflect a projected or planned transaction. "What-if" analysis. for AOL Time Warner are presented as if the merger between America Online and Time Warner had occurred on January 1, 2000, based on a preliminary allocation of purchase accounting. These results reflect reclassifications of each company's historical operating results and segment information to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the combined Company's financial statement presentation, as follows: -- Time Warner's digital media results have been allocated to the business segments now responsible for managing those operations and are no longer treated as a separate reportable business segment; -- Income and losses related to equity-method investments and gains and losses on the sale of investments have been reclassified from EBITDA and operating income (loss) to other income (expense), net, to better reflect the core operations of the business segments; -- Corporate expenses have been reclassified to selling, general and administrative costs as a reduction of EBITDA and operating income (loss); and -- Merger-related costs have been moved from other income (expense), net, to EBITDA and operating income (loss). Description of Business The Company classifies its business interests into six fundamental areas: AOL, consisting principally of interactive services, Web brands, Internet technologies and electronic commerce services; Cable, consisting principally of interests in cable television systems; Filmed Entertainment, consisting principally of interests in filmed entertainment and television production; Networks, consisting principally of interests in cable television and broadcast network programming; Music, consisting principally of interests in recorded music recorded music n → música grabada and music publishing The contractual relationship between a songwriter or music composer and a music publisher, whereby the writer assigns part or all of his or her music copyrights to the publisher in exchange for the publisher's commercial exploitation of the music. ; and Publishing, consisting principally of interests in magazine publishing, book publishing book publishing. The term publishing means, in the broadest sense, making something publicly known. Usually it refers to the issuing of printed materials, such as books, magazines, periodicals, and the like. and direct marketing. A majority of the Company's interests in Filmed Entertainment and Cable segments, and a portion of its interests in the Networks segment are held through Time Warner Entertainment Company, L.P. Revenue Classification Changes In the fourth quarter of 2000, the Company adopted Securities and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB SAB Spontaneous abortion. See Abortion. 101"). SAB 101 clarifies certain existing accounting principles for the timing of revenue recognition and the classification of revenues in financial statements. While America Online's and Time Warner's revenue recognition policies were consistent with the provisions of SAB 101, the new rules result in changes as to how revenues from certain transactions are classified in the AOL, Networks and Music segments. As a result of applying the provisions of SAB 101, the Company's revenues and costs during the first quarter of 2000 were reduced by an equal amount of $91 million on a pro forma basis. Adjusted Results In order to meaningfully assess underlying operating trends, management believes that operating results for each period should be analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. after excluding the effects of certain significant and nonrecurring items discussed in Note 2. As such, the foregoing discussion and analysis focuses on amounts and trends adjusted to exclude the impact of these unusual items. However, unusual items may occur in any period. Accordingly, investors and other users of this financial information individually should consider the types of events and transactions for which adjustments have been made. Note 2: Significant Gains, Charges and Other Nonrecurring Items Investment-Related Activity During the first quarter of 2001, there was a broad decline in the public equity markets, particularly in technology stocks, including investments held in the Company's portfolio. Similarly, the Company experienced significant declines in the value of certain privately held investments and restricted securities. As a result, the Company has recorded a $620 million noncash pretax charge to reduce the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of certain publicly traded and privately held investments and restricted securities that had experienced other-than-temporary declines. The charge has been included in other income (expense), net, in the accompanying statement of operations See Income statement. for the three months ended March 31, 2001. During the first quarter of 2000, the Company recognized gains Recognized Gain The amount of gain reported for income tax purposes. Notes: You can defer recognizing some gains until the following year(s). See also: Capital Gain, Capital Loss, Deferred Income Tax, Drought Sale, Exempt Income, Exemption, Gain, Recognized Loss of approximately $285 million from the sale of certain investments. These gains have been included in other income (expense), net, on a pro forma basis, in the accompanying statement of operations for the three months ended March 31, 2000. Gains on the Sale or Exchange of Cable Television Systems and Investments In 2000, largely in an ongoing effort to enhance its geographic clustering of cable television properties, the Company sold or exchanged various consolidated cable television systems and investments. For the three months ended March 31, 2000, the operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of the Cable segment include net pretax gains of $28 million, on a pro forma basis. Columbia House Investment Write-Down In March 2000, the proposed merger between CDNOW, Inc. and Columbia House was terminated. In connection with the termination of the merger, the risk associated with the timely execution of certain strategic alternatives for Columbia House's operations and the transformation of Columbia House's traditional business model to an online one increased. As a result, management concluded that the decline in Columbia House's business was likely to continue through the near term. As such, the Company recorded a $220 million noncash pretax charge in the first quarter of 2000 to reduce the carrying value of its investment in Columbia House to an estimate of its fair value. The charge has been included in other income (expense), net, on a pro forma basis, in the accompanying statement of operations for the three months ended March 31, 2000. Merger-Related Costs Merger-related costs consist of special charges related to mergers and merger-related restructurings, including the America Online-Time Warner merger. In connection with the America Online-Time Warner merger, the Company has incurred one-time merger-related costs, which are required to be expensed in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . Merger-related costs for the first quarter amounted to $71 million in 2001, primarily related to the AOL segment and $46 million in 2000 on a pro forma basis. These costs have been included in operating income in the accompanying statements of operations. Cumulative Effect of Change in Film Accounting Principle In June 2000, the Company adopted Statement of Position 00-2, "Accounting by Producers and Distributors of Films" ("SOP 00-2"). SOP 00-2 established new film accounting standards, including changes in revenue recognition and accounting for advertising, development and overhead costs overhead costs see fixed costs. . The Company adopted the provisions of SOP 00-2 retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a to the beginning of 2000. As a result, the Company's operating results for the three months ended March 31, 2000 include a one-time, noncash, after-tax charge of approximately $443 million, primarily to reduce the carrying value of its film inventory. This charge has been reflected as a cumulative effect of an accounting change in the accompanying pro forma statement Pro forma statement A financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows. of operations. Note 3: Income Taxes The relationship between income before income taxes and income tax expense of the Company is affected by the amortization of goodwill and certain other financial statement expenses that are not deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). for income tax purposes. Note 4: Net Loss per Common Share Basic net loss per common share is based upon the net loss applicable to common shares after preferred dividend preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) requirements and the weighted average of common shares outstanding during the period. Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net loss per common share adjusts for the effect of convertible securities, stock options and other potentially dilutive financial instruments only in the periods in which such effect would have been dilutive. Note 5: Comparability of Net Loss per Common Share As described more fully above, net loss per common share has been affected by certain significant, nonrecurring items recognized in 2001 and 2000. The aggregate net effect of these items was to increase basic net loss per common share by $0.09 for the first quarter of 2001 and by $0.10 in 2000, on a pro forma basis. Note 6: Diluted Cash Earnings Per Share Diluted cash earnings per share is defined as pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. excluding the effect of noncash amortization expense for consolidated and unconsolidated entities, less cash paid for taxes. Diluted cash earnings per share is calculated using weighted average shares outstanding after considering all outstanding options and dilutive securities. As described more fully above, diluted cash earnings per share has been affected by certain significant, nonrecurring items recognized in 2001 and 2000. The aggregate net effect of these items was to increase (decrease) diluted cash earnings per share by $(0.15) for the first quarter of 2001 and $0.01 in 2000, on a pro forma basis. |
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