AOL Time Warner Reports First Quarter 2003 Results.Business Editors 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. Time Warner Inc. has changed the way it describes its historical financial performance in its earnings releases in connection with the adoption by the SEC of Regulation G and other rules affecting the use and disclosure of non-GAAP financial measures. Accordingly, unless otherwise noted, the Company's financial results described in this release, such as 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 and Free Cash Flow, have not been adjusted for items that may affect their comparability, including items such as merger and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. . The impact of this change in the current quarter is to increase certain growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. over comparable 2002 periods beyond what they would have been without the change in reporting. NEW YORK--(BUSINESS WIRE)--April 23, 2003 AOL Time Warner Reports First Quarter 2003 Results EBITDA Increases 14% to $2.0 Billion; 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. Rises 9% to $1.2 Billion Free Cash Flow Totals $1.0 Billion; Cash Flow from Operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses Amounts to $1.5 Billion AOL Time Warner Inc. (NYSE NYSE See: New York Stock Exchange :AOL) today reported financial results for its first quarter ended March 31, 2003. Revenues for the quarter increased 6% over the same period in 2002 to $10.0 billion. Subscription revenues climbed 10% to $4.9 billion, led by growth in the Company's Cable and America Online See AOL. businesses. Content revenues improved 11% to $3.3 billion, due to increases at the Filmed Entertainment and HBO Hyperbaric oxygen therapy (HBO) A form of oxygen therapy in which the patient breathes oxygen in a pressurized chamber. Mentioned in: Ozone Therapy divisions. Advertising revenues declined 5% to $1.3 billion, stemming from decreases at America Online and Cable, offset partially by solid gains at the Publishing and Networks divisions. Other revenues decreased 21% to $472 million, due to declines at the America Online and Publishing divisions. The quarter's EBITDA rose 14% to $2.0 billion, led by growth at the Filmed Entertainment, Networks and Cable divisions, as well as a decline in restructuring charges from $107 million in the year-ago quarter to $24 million this quarter. Excluding the effect of these charges, EBITDA grew 9%. Operating Income climbed 9% to $1.2 billion, reflecting the EBITDA growth, which was offset in part by increased depreciation primarily at the America Online and Cable divisions. Cash Flow from Operations was $1.5 billion. Free Cash Flow totaled $1.0 billion, or 48% of EBITDA, partially due to the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. timing of working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. . At the end of the quarter, the Company's net debt totaled $26.3 billion, versus $25.8 billion at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2002. This net debt balance includes $2.1 billion of incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. borrowings upon the closing of its Time Warner Entertainment Company, L.P. ("TWE TWE Test of Written English TWE ThinkWave Educator (teacher productivity application) TWE That Was Easy TWE tap water enema TWE Threat Warning Equipment TWE Transitional Work Experience TWE Triangle Wind Ensemble ") 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). transaction. This increase was substantially offset during the quarter by the sale of an investment in GM Hughes for approximately $800 million, as well as the generation of significant free cash flow that was used to reduce debt. Chairman-elect and Chief Executive Officer Dick Parsons Parsons, city (1990 pop. 11,924), Labette co., SE Kans.; inc. 1871. It is a shipping point for dairy products, grain, and livestock. Manufactures include ammunition, wire and paper products, plastics, and appliances. said: "Our solid first quarter results put us firmly on track to deliver on our full-year operating and Free Cash Flow expectations. During this quarter, we also continued to make solid progress on our other key priorities. We completed the TWE restructuring that both simplifies our Company's structure and maximizes its operating flexibility. We also made progress on our debt reduction program by selling our investment in GM Hughes and by using our substantial Free Cash Flow generated in the quarter to pay down debt. And, just yesterday, we announced the sale of our 50% stake in Comedy Central for $1.2 billion, demonstrating our commitment to meet our overall debt reduction goals." Consolidated Reported Results The Company reported net income of $396 million, or $0.09 per basic and 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. common share for the three months ended March 31, 2003. The net income in 2003 includes $109 million of gains related to the sale of certain investments, $23 million of non-cash investment charges and $24 million of merger and restructuring charges. This compares to a net loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $8 million, or break-even per basic and diluted common share, before discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and the cumulative effect of the adoption of FAS 142 for the three months ended March 31, 2002. The net loss in 2002 includes $581 million of pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta , non-cash investment charges and $107 million of merger and restructuring charges. The adoption of FAS 142 in the first quarter of 2002 resulted in an approximate $54 billion non-cash charge 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. 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 the Company's goodwill. In addition, during the third quarter of 2002, in connection with the restructuring of the cable partnership between TWE and Advance/Newhouse, the Company began reflecting certain cable systems as discontinued operations. The discontinued operations reported a net loss of $1 million for the three months ended March 31, 2002. After the cumulative effect of the accounting change and discontinued operations, the Company recorded a net loss of $54.2 billion, or $12.25 per basic and diluted common share, for the three months ended March 31, 2002. Performance of Divisions The schedules below reflect AOL Time Warner's performance for the first quarter by line of business (in millions):
Three Months Ended March 31:
Revenues: 2003 2002
------ ------
AOL $2,197 $2,291
Cable 1,842 1,683
Filmed Entertainment 2,364 2,136
Networks 2,092 1,786
Music 914 947
Publishing 1,152 1,081
Intersegment Eliminations (563) (517)
------ ------
Total Revenues $9,998 $9,407
====== ======
EBITDA:
AOL $ 404 $ 343
Cable 691 652
Filmed Entertainment 251 181
Networks 500 431
Music 87 91
Publishing 148 145
Corporate (101) (106)
Intersegment Eliminations 5 2
------ ------
Total EBITDA $1,985 $1,739
====== ======
Operating Income:
AOL $ 194 $ 174
Cable 359 378
Filmed Entertainment 183 114
Networks 452 389
Music (14) 20
Publishing 81 93
Corporate (109) (113)
Intersegment Eliminations 5 2
------ ------
Total Operating Income $1,151 $1,057
====== ======
** EBITDA and Operating Income in the first quarter 2003 reflect $24
million of merger and restructuring costs, including $4 million at
AOL, $8 million at Networks and $12 million at Publishing compared
to $107 million of merger and restructuring costs in the same
period last year, including $75 million at AOL, $5 million at
Music and $27 million at Corporate.
America Online America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. Online's EBITDA increased 18% and Operating Income rose 11% in the quarter on revenues that decreased 4%. EBITDA and Operating Income included restructuring charges of $4 million in this quarter and $75 million in the year-ago quarter. The increase in America Online's Subscription revenues was more than offset by declines in Advertising and Other revenues. Subscription revenues grew 11%, principally as a result of increases 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). from members as well as favorable foreign exchange rates and
growth in domestic broadband broadbandTerm 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). subscribers. Advertising revenues decreased by 42%, reflecting a reduction in the benefits from prior-period contract sales of $178 million. Other revenues declined 61%, due mainly to AOL's previously announced strategy of reducing the amount of pop-up promotions. The increase in EBITDA versus the year-ago period is entirely attributable to the decline in restructuring charges. Excluding the effect of these charges, America Online's EBITDA declined 2% due to the reduction in high-margin advertising revenues, offset in part by the subscriber revenue gains, an improved performance at AOL Europe and domestic network cost savings. The increase in Operating Income reflected the EBITDA increase, offset partially by higher depreciation due primarily to an increase in network assets acquired. At March 31, the AOL service had 26.2 million members in the US, an increase of 141,000 from the same quarter last year (a decline of 289,000 compared to the quarter ended December December: see month. 31, 2002), and 6.3 million members in Europe, an increase of 368,000 versus the year-ago quarter (a decline of 63,000 compared to the quarter ended December 31, 2002). America Online also reported 1.9 million subscribers to the AOL service through partially owned entities elsewhere in the world, a decrease of 733,000 from the first quarter of 2002 (a decline of 465,000 compared to the quarter ended December 31, 2002). At the end of the quarter, America Online launched AOL for Broadband that delivers multimedia content -- such as CD-quality radio, video clips A short video presentation. including movie trailers, sports highlights, and live news reports -- along with new pricing and enhanced features to AOL members with high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. connections. Also in the quarter, the AOL service introduced two premium services: MusicNet on AOL, an online music subscription service, and AOL Voicemail See voice mail. , a premium service that enables AOL members to access their home voice messages and AOL e-mails from any phone or computer. Cable Cable's EBITDA climbed 6% in the quarter on a 9% increase in revenues. Operating Income decreased 5%. Subscription revenues grew 14%, driven by increased basic, digital and high-speed data subscribers, higher basic cable rates and increased buy rates for pay-per-view pay-per-view n. A service offered by cable television companies that allows subscribers to view special programs for an additional charge. pay services. Advertising revenues declined 33%, due to decreases in advertising purchased by programming vendors to promote new and existing channels and in intercompany revenues, offset partially by a 15% increase in other third-party advertising. The EBITDA gains reflected the increase in subscription revenues and the improved profitability of the high-speed data business, partly offset by the decline in high-margin advertising revenues, higher programming expenses and increased personnel costs associated with the rollout of new digital and high-speed data services. The decline in Operating Income was due to the increase in depreciation, driven primarily by increased investment in customer premise equipment (digital boxes and modems). Basic cable subscribers increased at an annual rate of 1.1%. 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. added 199,000 net digital video subscribers during the quarter to reach a total of 3.9 million, representing 36% of basic cable subscribers. As a leading US broadband provider, Time Warner Cable added 260,000 net residential high-speed data subscribers this quarter for a total of 2.7 million, representing 15% of eligible homes passed. Filmed Entertainment Filmed Entertainment's EBITDA rose a very strong 39% -- leading to 61% growth in Operating Income -- on an 11% increase in revenues in the quarter. The increase in revenues was due primarily to continued growth in home video sales, particularly DVDs, as well as growth in Warner Bros. Television Warner Bros. Television is the television production and distribution arm of Time Warner's Warner Bros. Entertainment and The CW Television Network (in which Warner has a 50% ownership stake). , which more than offset declines in theatrical box office, partially due to difficult comparisons to the prior year and fewer releases year over year. The significant growth in EBITDA reflected the revenue increases and improved margin contribution from the theatrical and television businesses, as well as reduced promotional spending associated with fewer releases year over year. New Line's The Lord of the Rings: The Two Towers ($900 million in worldwide box office to date) and Warner Bros BROS Brothers BROS Benefits and Retirement Operations Section (King County, Washington) BROS Barnes and Richmond Operatic Society (London, UK) . Pictures' Harry Potter A potter is someone who makes pottery. Potter may also refer to: People
Warner Home Video Warner Home Video is the home video unit of Warner Bros. Home Entertainment Group, a division of Warner Bros. Entertainment, Inc. It was founded in 1978 as WCI Home Video (for Warner Communications, Inc.). It was re-named Warner Home Video in 1980. ranked #1 in the US for the quarter in combined DVD DVD: see digital versatile disc. DVD in full digital video disc or digital versatile disc Type of optical disc. The DVD represents the second generation of compact-disc (CD) technology. and VHS (Video Home System) A half-inch, analog videocassette recorder (VCR) format introduced by JVC in 1976 to compete with Sony's Betamax, introduced a year earlier. sales and rentals, capturing 21.0% and 18.5% market share, respectively. The Company's worldwide revenues from DVDs rose 97% year over year to $658 million. New Line and Warner Bros. Pictures generated $180 million and $174 million respectively in domestic box office - combining for an industry share of 19.9%. Networks Networks' EBITDA and Operating Income both increased a strong 16% in the quarter on revenue growth of 17%. Subscription, Advertising and Content revenues all increased during the quarter. Subscription revenue gains of 5% resulted from an increase in subscribers and subscription rates at HBO, as well as the Turner networks. Advertising revenues increased 8%, reflecting a strong increase of 27% at The WB due to higher CPMs and ratings. Content revenues increased a dramatic 134%, due primarily to higher home video sales, including the releases of My Big Fat Greek In desktop publishing, to display text in a representative form in which the actual letters are not discernible, because the screen resolution isn't high enough to display them properly. The software lets you set which font sizes should be greeked. Wedding (HBO Video's biggest release ever) and original HBO programming. EBITDA and Operating Income benefited from across-the-board increases in revenues, partly offset by increases in programming and newsgathering news·gath·er·ing adj. Of, relating to, or involving the research and reportage of news: a worldwide newsgathering operation. news costs. For the quarter, TNT TNT: see trinitrotoluene. TNT in full trinitrotoluene Pale yellow, solid organic compound made by adding nitrate (−NO2) groups to toluene. and 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. were the #1 and #2 basic cable networks among adults 18-49 and 25-54 in both primetime and total day. Led by its coverage of the NBA NBA abbr. 1. National Basketball Association 2. National Boxing Association NBA (US) n abbr (= National Basketball Association) → Basketball-Dachverband (= All-Star Game An all-star game is an exhibition game played by the best players in their sports league. The players are often chosen by a popular vote of fans of the sport and the game often occurs at the halfway point of the regular season, although this is not the case for some all-star games , Turner had 4 of the top 5 cable programs in the quarter for adults 18-49 and 25-54. HBO's programming was honored hon·or n. 1. High respect, as that shown for special merit; esteem: the honor shown to a Nobel laureate. 2. a. Good name; reputation. b. with awards for best actor and actress (The Sopranos) and best drama ensemble cast An ensemble cast is a cast in which the principal performers are assigned roughly equal amounts of importance in a dramatic production. This kind of casting became more popular in television series because it allows for flexibility for writers to focus on different (Six Feet Under) at the 9th Annual Screen Actors Guild Awards The Screen Actors Guild Awards are an annual award given by the Screen Actors Guild (SAG) to recognize outstanding performances by members. SAG Awards have been one of the major awards events in Hollywood since 1995. . Season to date through March 30, The WB posted the largest gains of any broadcast network in several key 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. , including adults 18-34, adults 18-49 and males 12-34, as well as a solid 11% increase in persons 12-34. Music Warner Music Group's EBITDA declined 4% in the quarter on a revenue decline of 3%. Operating Income decreased from $20 million to a $14 million loss. The revenue decrease was due mainly to declines in recorded music recorded music n → música grabada shipments related to the ongoing weakness in the worldwide music industry, partially offset by improved performances in DVD manufacturing and favorable currency translation. The EBITDA decrease was due primarily to the revenue decline partially offset by the net benefit of changes in various reserves and accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. . The decline in Operating Income reflected the EBITDA decline and increased amortization due to a decrease in the period of amortization of Music record catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. and publishing copyrights. For the quarter, Warner Music improved its competitive position despite difficult industry trends. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Soundscan SoundScan™ Osteoporosis An ultrasound used to assess bone density and thickness of cortical bone. See Bone densitometry. , Warner Music's domestic album share through March 31 was 17.8% -- ranking second among all music companies. Top worldwide sellers in the quarter included such artists as Kid Rock, Red Hot Chili Peppers Red Hot Chili Peppers are an American alternative rock band formed in Los Angeles, California in 1983. For most of its career, the group has consisted of vocalist Anthony Kiedis, guitarist John Frusciante, bassist Michael "Flea" Balzary, and drummer Chad Smith. , Josh JOSH Joshua JOSH Job Scheduling Hierarchically Groban Groban could refer to:
possessing the best body in the whole world. like the hottest, sexiest body ever! the feeling of his skin kills me and sends me straight to heaven. and Phil PHIL Philosophy Phil Philippine PHIL Philippians PHIL Philadelphia, PA, USA PHIL Public Health Image Library (US CDC) Collins. In the second quarter, Linkin Park's Meteora debuted at #1 on the Soundscan chart, selling more than 810,000 units, scoring the biggest first week sales in Warner Music Group's history. Publishing Publishing's EBITDA increased 2% in the quarter on revenue gains of 7%. Operating Income decreased 13%. Revenue growth reflected gains in Subscription and Advertising revenues, offset primarily by declines in Other revenues. Subscription revenues were up 21%, principally due to an easier comparison related to the timing of circulation agents' commissions in the prior period. Advertising revenues grew a solid 10%, driven primarily by advertising gains across virtually all of the magazines - including People, InStyle In`style´ v. t. 1. To style. , Real Simple, Time and Entertainment Weekly - that reflected in part soft comparisons to the first quarter of 2002. Other revenues decreased due to declines at Time Life. The EBITDA increase reflected advertising revenue gains, partly offset by a $17 million decline at the Time Life business, a $10 million increase in pension costs and $12 million in restructuring charges related to workforce reductions. The decrease in Operating Income was due primarily to increased amortization associated with the acquisition of Synapse synapse (sĭn`ăps), junction between various signal-transmitter cells, either between two neurons or between a neuron and a muscle or gland. A nerve impulse reaches the synapse through the axon, or transmitting end, of a nerve cell, or neuron. . Based on Publishers Information Bureau (PIB See NIST binary. ) data, Time Inc.'s 2003 share of overall domestic advertising through March 31 was 25.4%, up 0.4 percentage points from the same period last year. This represents Time Inc.'s best first quarter share performance since 1989. Based on PIB advertising spending data, Time Inc. has outperformed the rest of the industry this year through March by 2.7 percentage points. During the quarter, Time Inc. had the most magazines of any publisher on Adweek's "Hot List," with Real Simple at #3, InStyle at #5 and Cooking Light at #7. In addition, Time Inc.'s magazines were nominated nom·i·nate tr.v. nom·i·nat·ed, nom·i·nat·ing, nom·i·nates 1. To propose by name as a candidate, especially for election. 2. To designate or appoint to an office, responsibility, or honor. for 12 National Magazine Awards in various categories, including nominations in the General Excellence category for Skiing skiing, sport of sliding over snow on skis—long, narrow, flexible runners. Water skiing is a warm-weather sport in which a motor-propelled craft tows a skier through the water. , Entertainment Weekly, Fortune, Real Simple, Parenting and Sports Illustrated Sports Illustrated is the largest weekly American sports magazine owned by media conglomerate Time Warner. It has over 3 million subscribers and is read by 23 million adults each week, including over 18 million men, 19% of the adult males in the country. . AOL Time Warner Book Group had 21 titles on the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Times bestsellers list this quarter. Popular titles included James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. Patterson's The Jester, Anita Shreve's Sea Glass and the mass-market mass-mar·ket adj. Of, relating to, or produced for consumption in large numbers, especially when sold in supermarkets, in drugstores, and at newstands: a mass-market paperback. tr.v. release of James Patterson's Second Chance. Use of EBITDA and Free Cash Flow AOL Time Warner considers EBITDA to be an important indicator of the Company's operational strength and performance of its businesses. In addition, Free Cash Flow is considered to be an important indicator of the Company's ability to service its debt and make strategic investments. EBITDA is defined as Operating Income (loss) before non-cash depreciation of tangible assets Tangible Asset An asset that has a physical form such as machinery, buildings and land. Notes: This is the opposite of an intangible asset such as a patent or trademark. Whether an asset is tangible or intangible isn't inherently good or bad. , amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. writedowns related to goodwill and intangible assets. EBITDA eliminates the uneven effect across all business segments of considerable amounts of non-cash depreciation of tangible assets and amortization or writedowns of certain intangible assets, including goodwill, that were recognized in business combinations. Free Cash Flow is defined as cash provided by continuing operations less capital expenditures and product development costs, dividend payments and partnership distributions, and principal payments on capital leases. Both EBITDA and Free Cash Flow should be considered in addition to, not as a substitute for the Company's operating income (loss), net income (loss) and various cash flow measures (e.g., cash provided by operations), respectively, as well as other measures of financial performance reported 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 . About AOL Time Warner AOL Time Warner is the world's leading media and entertainment company, whose businesses include interactive services, cable systems, filmed entertainment, television networks, music and publishing. The Company's earnings conference call can be heard live at 10 am ET on Wednesday Wednesday: see week. , April 23. To listen to the call, visit www.aoltimewarner.com/investors or AOL Keyword (1) A word used in a text search. (2) A word in a text document that is used in an index to best describe the contents of the document. (3) A reserved word in a programming or command language. 1. : 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 or beliefs, and are 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 and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. factors. More detailed information about these factors may be found in filings by AOL Time Warner with the Securities and Exchange Commission, including its most recent 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.
CONSOLIDATED BALANCE SHEET
(Unaudited)
March December
31, 2003 31, 2002
--------- ---------
(millions, except
ASSETS per share amounts)
Current assets
Cash and equivalents $ 3,687 $ 1,730
Receivables, less allowances of $2.304 and $2.379
billion 4,267 5,667
Inventories 2,202 1,896
Prepaid expenses and other current assets 1,998 1,862
--------- ---------
Total current assets 12,154 11,155
Noncurrent inventories and film costs 3,215 3,351
Investments, including available-for-sale
securities 4,283 5,138
Property, plant and equipment 12,086 12,150
Intangible assets subject to amortization 6,857 7,061
Intangible assets not subject to amortization 40,401 37,145
Goodwill 39,838 36,986
Other assets 2,374 2,464
--------- ---------
Total assets $ 121,208 $ 115,450
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,897 $ 2,459
Participations payable 1,746 1,689
Royalties and programming costs payable 1,541 1,495
Deferred revenue 1,369 1,209
Debt due within one year 519 155
Other current liabilities 6,014 6,388
--------- ---------
Total current liabilities 13,086 13,395
Long-term debt 29,440 27,354
Deferred income taxes 12,189 10,823
Deferred revenue 1,044 990
Other liabilities 4,570 5,023
Minority interests 6,123 5,048
Shareholders' equity
Convertible Preferred Stock, $.10 par value, 1
share authorized, 1 share issued, 1 share
outstanding, $1.5 billion liquidation preference 1,500 -
Series LMCN-V common stock, $0.01 par value, 171.2
million shares outstanding in each period 2 2
AOL Time Warner common stock, $0.01 par value,
4.320 and 4.305 billion shares outstanding 43 43
Paid-in capital 155,226 155,134
Accumulated other comprehensive loss, net (477) (428)
Retained earnings (101,538) (101,934)
--------- ---------
Total shareholders' equity 54,756 52,817
--------- ---------
Total liabilities and shareholders' equity $ 121,208 $ 115,450
========= =========
See accompanying notes.
AOL TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31,
(Unaudited)
2003 2002
-------- --------
(millions, except
per share amounts)
Revenues:
Subscriptions $ 4,935 $ 4,467
Advertising 1,338 1,408
Content 3,253 2,931
Other 472 601
-------- --------
Total revenues 9,998 9,407
Costs of revenues (6,004) (5,663)
Selling, general and administrative (2,624) (2,416)
Amortization of goodwill and other intangible assets (195) (164)
Merger and restructuring costs (24) (107)
-------- --------
Operating income 1,151 1,057
Interest expense, net (468) (376)
Other income (expense), net 66 (655)
Minority interest expense (56) (31)
-------- --------
Income (loss) before income taxes, discontinued
operations and cumulative effect of accounting
change 693 (5)
Income tax provision (297) (3)
-------- --------
Income (loss) before discontinued operations and
cumulative effect of accounting change 396 (8)
Discontinued operations, net of tax - (1)
-------- --------
Income (loss) before cumulative effect of accounting
change 396 (9)
Cumulative effect of accounting change - (54,235)
-------- --------
Net income (loss) $ 396 $(54,244)
======== ========
Basic income (loss) per common share before
discontinued operations and cumulative effect of
accounting change $ 0.09 $ -
Discontinued operations - -
Cumulative effect of accounting change - (12.25)
-------- --------
Basic net income (loss) per common share $ 0.09 $ (12.25)
======== ========
Diluted income (loss) per common share before
discontinued operations and cumulative effect of
accounting change $ 0.09 $ -
Discontinued operations - -
Cumulative effect of accounting change - (12.25)
-------- --------
Diluted net income (loss) per common share $ 0.09 $ (12.25)
======== ========
Average basic common shares 4,483.2 4,429.3
======== ========
Average diluted common shares 4,524.9 4,429.3
======== ========
See accompanying notes.
AOL TIME WARNER INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
(Unaudited)
2003 2002
-------- --------
(millions)
OPERATIONS
Net income (loss) $ 396 $(54,244)
Adjustments for noncash and nonoperating items:
Cumulative effect of accounting change - 54,235
Depreciation and amortization 834 682
Amortization of film costs 710 558
Loss on writedown of investments 27 590
Gain on sale of investments (109) -
Equity in losses of investee companies after
distributions 31 70
Changes in operating assets and liabilities, net of
acquisitions (344) (289)
Adjustments relating to discontinued operations - 157
-------- --------
Cash provided by operations 1,545 1,759
-------- --------
INVESTING ACTIVITIES
Investments in available-for-sale securities (2) -
Other investments and acquisitions, net of cash
acquired (235) (5,668)
Capital expenditures and product development costs
from continuing operations (554) (589)
Capital expenditures from discontinued operations - (77)
Investment proceeds from available-for-sale
securities 904 10
Other investment proceeds 10 13
-------- --------
Cash provided (used) by investing activities 123 (6,311)
-------- --------
FINANCING ACTIVITIES
Borrowings 1,793 6,201
Debt repayments (1,549) (1,232)
Redemption of redeemable preferred securities of
subsidiaries - (255)
Proceeds from exercise of stock option and dividend
reimbursement plans 76 147
Current period repurchases of common stock - (102)
Dividends paid and partnership distributions from
discontinued operations, net - (17)
Principal payments on capital leases (31) (7)
Other - (16)
-------- --------
Cash provided by financing activities 289 4,719
-------- --------
INCREASE IN CASH AND EQUIVALENTS 1,957 167
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 1,730 719
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 3,687 $ 886
======== ========
See accompanying notes.
AOL TIME WARNER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF EBITDA TO OPERATING INCOME (LOSS)
(millions, unaudited)
Three Months Ended March 31, 2003
Operating
income
EBITDA Depreciation Amortization (loss)
------ ------------ ------------ ---------
AOL $ 404 $ (171) $ (39) $ 194
Cable 691 (330) (2) 359
Filmed Entertainment 251 (20) (48) 183
Networks 500 (45) (3) 452
Music 87 (38) (63) (14)
Publishing 148 (27) (40) 81
Corporate (101) (8) - (109)
Intersegment elimination 5 - - 5
-------- -------- -------- --------
Total $ 1,985 $ (639) $ (195) $ 1,151
======== ======== ======== ========
Three Months Ended March 31, 2002
Operating
income
EBITDA Depreciation Amortization (loss)
------ ------------ ------------ ---------
AOL $ 343 $ (128) $ (41) $ 174
Cable 652 (274) - 378
Filmed Entertainment. 181 (19) (48) 114
Networks 431 (39) (3) 389
Music 91 (28) (43) 20
Publishing 145 (23) (29) 93
Corporate (106) (7) - (113)
Intersegment elimination 2 - - 2
-------- -------- -------- --------
Total $ 1,739 $ (518) $ (164) $ 1,057
======== ======== ======== ========
AOL TIME WARNER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF CASH PROVIDED BY OPERATIONS TO FREE CASH FLOW FROM
CONTINUING OPERATIONS
(millions, unaudited)
AOL Time Warner evaluates operating performance based on several
factors, including free cash flow from continuing operations, which
excludes the impact of discontinued operations and is defined as cash
flow from operations after deducting capital expenditures and product
development costs, principal payments on capital leases, dividend
payments and partnership distributions.
Three Months
Ended March 31,
---------------
2003 2002
------ ------
Cash provided by operations $1,545 $1,759
Less discontinued operations:
Net loss - 1
Other changes - (157)
------ ------
Cash provided by continuing operations 1,545 1,603
Capital expenditures and product development costs
from continuing operations (554) (589)
Principal payments on capital leases from
continuing operations (31) (7)
------ ------
Free cash flow from continuing operations $ 960 $1,007
====== ======
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: Description of Business and Basis of Presentation Description of Business AOL Time Warner Inc. ("AOL Time Warner" or the "Company") is the world's leading media and entertainment company, whose businesses include interactive services, cable systems, filmed entertainment, television networks, music and publishing. AOL Time Warner classifies its business interests into six fundamental areas: AOL, consisting principally of interactive services, Web properties, Internet Internet Publicly 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 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, 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 DVD manufacturing 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. Basis of Presentation Use of EBITDA and Free Cash Flow AOL Time Warner considers EBITDA to be an important indicator of the Company's operational strength and performance of its businesses. In addition, Free Cash Flow is considered to be an important indicator of the Company's ability to service its debt and make strategic investments. EBITDA is defined as operating income (loss) before non-cash depreciation of tangible assets, amortization of intangible assets and impairment write-downs related to goodwill and intangible assets. EBITDA eliminates the uneven effect across all business segments of considerable amounts of non-cash depreciation of tangible assets and amortization or write-downs of certain intangible assets, including goodwill, that were recognized in business combinations. Free Cash Flow is defined as cash provided by continuing operations less capital expenditures and product development costs, dividend payments and partnership distributions, and principal payments on capital leases. Both EBITDA and Free Cash Flow should be considered in addition to, not as a substitute for the Company's operating income (loss), net income (loss) and various cash flow measures (e.g., cash provided by operations), respectively, as well as other measures of financial performance reported in accordance with generally accepted accounting principles. Note 2: TWE Restructuring On March 31, 2003, AOL Time Warner and Comcast Comcast Corporation, (NASDAQ: CMCSA) is the largest[1] cable television (CATV) company and the second largest Internet service provider in the United States. completed the restructuring of Time Warner Entertainment Company, L.P. ("TWE"). As a result of the restructuring, AOL Time Warner assumed complete ownership of TWE's content assets, including Warner Bros. and Home Box Office, as well as TWE's interests in The WB Network, Comedy Central and Court TV. All of AOL Time Warner's interests in cable, including those held through TWE, are now held through or for the benefit of a new subsidiary of AOL Time Warner called Time Warner Cable Inc. ("TWC TWC The Weather Channel TWC Time-Warner Cable TWC Texas Workforce Commission (also seen as TWFC) TWC The Wellness Community TWC The Washington Center TWC Teachers & Writers Collaborative TWC Trustworthy Computing Inc."). In exchange for its previous stake in TWE, Comcast received AOL Time Warner preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , which will be converted into $1.5 billion of AOL Time Warner common stock. In addition, at the time of the restructuring there was $2.1 billion of pre-existing Adj. 1. pre-existing - existing previously or before something; "variations on pre-existent musical themes" pre-existent, preexistent, preexisting antecedent - preceding in time or order debt of a Comcast subsidiary recognized by TWC Inc. Comcast will now own a 17.9% economic stake in TWC Inc. and a 4.7% economic stake in TWE. Comcast's combined interests in TWC Inc. and TWE have resulted in Comcast holding an approximate 21% economic interest in the business of TWC Inc. The TWE restructuring has been accounted for as a purchase business combination and is reflected in the accompanying balance sheet as of March 31, 2003. The Company has performed a preliminary 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 of the purchase price, which has principally been allocated to cable franchises and goodwill. Based upon its controlling voting interest Voting interest in business and accounting is a percentage of voting stock owned. This notion is different from economic interest that refers to a percentage of all the equity issued, including preferred stock, warrants, and so on. in TWC Inc., AOL Time Warner consolidates the results of TWC Inc. for accounting purposes. Subject to market conditions and the registration statement being declared effective by the Securities and Exchange Commission, AOL Time Warner plans to conduct an initial public offering of TWC Inc. later this year. It is anticipated that the first $2.1 billion of net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). raised in any such offering would be used to repay the $2.1 billion of debt recognized by TWC Inc. Thereafter, Comcast will have certain priority registration rights with respect to its interest in TWC Inc. Note 3: Other Transactions and Items Affecting Comparability
Three Months Ended March 31,
----------------------------
2003 2002
----- -----
(millions)
Merger and restructuring costs $ (24) $(107)
Gain on sale of assets 109 -
Loss on writedown of other investments (23) (581)
----- -----
Pretax impact $ 62 $(688)
Income tax impact (25) 275
----- -----
After-tax impact $ 37 $(413)
===== =====
Merger and Restructuring Costs Merger and restructuring costs consist of charges related to mergers, employee terminations and exit activities, which are expensed in accordance with accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . During the three months ended March 31, 2003, the Company incurred restructuring costs related to various employee and contractual terminations of $24 million, including $4 million at AOL, $8 million at Networks and $12 million at Publishing. During the three months ended March 31, 2002, the Company incurred restructuring costs of $107 million, including $75 million at AOL, $5 million at Music and $27 million at Corporate. These costs are included in "merger and restructuring costs" in the accompanying consolidated statement of operations See Income statement. . Investment Gains During the three months ended March 31, 2003, 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 on the sale of certain investments of approximately $109 million, including a gain of approximately $50 million from the sale of the Company's interest in Hughes and a gain of approximately $35 million on the sale of the Company's interest in an international theater chain. These gains are included in "other income (expense), net" in the accompanying consolidated statement of operations. Investment Writedowns Over the past few years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time Company has experienced significant declines in the value of certain publicly traded and privately held investments, restricted securities and investments accounted for using the equity method of accounting. As a result, the Company has recorded non-cash pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charges to reduce the carrying value of certain investments that experienced other-than-temporary declines in value and to reflect market fluctuations in equity derivative In finance, an equity derivative is a class of financial instruments whose value is at least partly derived from one or more underlying equity securities. Market participants trade equity derivatives in order to transfer or transform certain risks associated with the instruments. For the first quarter of 2003, non-cash charges to reflect other-than-temporary declines in the Company's investments were $23 million, which is comprised of $27 million to reduce the carrying value of certain investments that experienced other-than-temporary declines in market value, offset in part by $4 million of gains to reflect market fluctuations in equity derivative instruments. For the first quarter of 2002, non-cash charges to reflect other-than-temporary declines in the Company's investments were $581 million, which is comprised of $590 million to reduce the carrying value of certain investments that experienced other-than-temporary declines in market value, offset in part by $9 million of gains to reflect market fluctuations in equity derivative instruments. Included in the $590 million charge relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc other-than-temporary declines in value is a $571 million non-cash pretax charge to reduce the carrying value of AOL Time Warner's investment in Time Warner Telecom Time Warner Telecom NASDAQ: TWTC is headquartered in Littleton, Colorado. The company provides managed network services, specializing in Ethernet and transport data networking, Internet access, local and long distance voice, VoIP and security, to enterprise Inc., a 44% owned equity investment. These writedowns are included in "other income (expense), net" in the accompanying consolidated statement of operations. Note 4: Intercompany Transactions Intercompany transaction Transaction carried out between two units of the same corporation. In the normal course of business, the AOL Time Warner segments enter into transactions with one another. The most common types of intercompany transactions include: -- The Filmed Entertainment segment generating content revenue by licensing television and theatrical programming to the Networks segment; -- The Networks segment generating subscription revenues by selling cable network programming to the Cable segment; -- The AOL, Cable, Networks and Publishing segments generating advertising revenue by cross-promoting the products and services of all AOL Time Warner segments; and -- The Music segment generating other revenue by manufacturing DVDs for the Filmed Entertainment segment. These intercompany transactions are recorded by each segment at fair value as if the transactions were with third parties and, therefore, impact segment performance. While intercompany transactions are treated like third-party transactions to determine segment performance, the revenues (and corresponding expenses recognized by the segment that is counterparty Counterparty The other participant, including intermediaries, in a swap or contract. to the transaction) are eliminated in consolidation and, therefore, do not themselves impact consolidated results. Revenues recognized by AOL Time Warner's segments and eliminated as intercompany transactions in deriving consolidated revenues are as follows:
Three Months Ended March 31,
----------------------------
2003 2002
----- -----
(millions)
Intercompany Revenues
AOL $ 50 $ 80
Cable 16 30
Filmed Entertainment 177 170
Networks 152 133
Music 149 93
Publishing 19 11
----- -----
Total intercompany revenues $ 563 $ 517
===== =====
Included in the total intercompany revenues above are intercompany advertising revenues, as follows:
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
(millions)
Intercompany Advertising Revenues:
AOL $ 33 $ 54
Cable 2 27
Filmed Entertainment - -
Networks 24 40
Music - -
Publishing 19 11
----- -----
Total intercompany advertising revenues $ 78 $ 132
===== =====
Note 5: Cable Capital Expenditures and Subscriber Statistics Capital Expenditures AOL Time Warner's Cable segment generally capitalizes expenditures for tangible fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → having a useful life of greater than one year. Capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. costs typically include direct material, direct labor, overhead and interest. Sales and marketing costs, as well as costs of repairing or maintaining existing fixed assets, are expensed as incurred. Types of capitalized expenditures at the Cable segment include plant upgrades, drops (i.e., customer installations), converters and cable modems cable modem Modem used to convert analog data signals to digital form and vise versa, for transmission or receipt over cable television lines, especially for connecting to the Internet. . With respect to customer premise equipment, including converters and cable modems, the Cable segment capitalizes direct installation charges only upon the initial deployment of such assets. All costs incurred in subsequent disconnects and reconnects are expensed as incurred. Depreciation on these assets is provided generally using the straight-line method Noun 1. straight-line method - (accounting) a method of calculating depreciation by taking an equal amount of the asset's cost as an expense for each year of the asset's useful life straight-line method of depreciation over their estimated useful life. For converters and modems, such life is generally 3-5 years and for plant upgrades, such useful life is up to 16 years. As of March 31, 2003, the total net book value of capitalized labor and overhead costs overhead costs see fixed costs. associated with the installation of converters and modems was approximately $160 million. As of that same date, the net book value of all capitalized costs associated with converters and modems, including equipment costs, was approximately $1.4 billion. The Cable segment's capital expenditures from continuing operations are comprised of the following categories:
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
(millions)
Customer premise equipment $ 178 $ 199
Scaleable infrastructure 25 40
Line extensions 39 38
Upgrade/rebuild 38 39
Support capital 66 42
----- -----
Total capital expenditures $ 346 $ 358
===== =====
Subscriber Statistics At the AOL Time Warner Cable segment, total customer relationships, representing the number of customers that receive at least one level of service, increased by 3% to approximately 11.3 million as of March 31, 2003 compared to approximately 11.0 million as of March 31, 2002 and revenue generating units, representing the total of all analog video The original video recording method that stores continuous waves of red, green and blue intensities. In analog video, the number of rows is fixed. There are no real columns, and the maximum detail is determined by the frequency response of the analog system. , digital video, high-speed data and telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. customers, increased by 14% to approximately 17.7 million as of March 31, 2003 compared to approximately 15.6 million as of March 31, 2002. The Company's subscriber amounts include subscribers at both consolidated entities and investees accounted for under the equity method of accounting that are managed by the Company. |
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