TIME WARNER PLANS BUYBACK : FIRM LOOKS TO CURB AFFECT OF EMPLOYEE STOCK OPTIONS.Byline: Geraldine Fabrikant 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 Time Warner Inc. said Monday that it planned to buy back about 15 million shares, or 5 percent of its outstanding shares. The company announced the buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may the same day it reported a wider loss for the first quarter. But the media and entertainment giant showed gains in all its core businesses, except music. The stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. is an attempt to offset the future impact of employees' exercising their stock options. Time Warner has one of the richest stock-option plans in the country, 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. Graef Crystal, an independent compensation expert. About 20 percent of its 390 million shares have been set aside for option plans. By buying back a portion of its stock, Time Warner hopes to avoid some of the dilution that the issuance of so many new shares would cause. The company is doing so now because it believes that the share price is undervalued Undervalued A stock or other security that is trading below its true value. Notes: The difficulty is knowing what the "true" value actually is. Analysts will usually recommend an undervalued stock with a strong buy rating. . Shares of Time Warner rose 25 cents to $39.25. To finance the buyback, the company said that it would borrow about $750 million against proceeds from the stock options. For the quarter, the company reported a loss of $119 million - more than twice the loss of $47 million in the comparable quarter a year ago. A company spokesman attributed the larger loss to increased interest expenses related to the purchases of the KBLCOM unit from Houston Industries and three cable systems from Summit Communications last year. But revenues jumped to $2.068 billion in the quarter, from $1.817 billion. And operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. - often considered a better measure of a media company's cash flow - rose 32 percent, to $899 million from $681 million in the quarter a year earlier. Operating cash flow - earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
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