Time Warner Inc. Reports Results for 2005 Full Year and Fourth Quarter.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 -- Time Warner Inc. (NYSE NYSE See: New York Stock Exchange :TWX (TeletypeWriter eXchange Service) A U.S. and Canadian dial-up communications service that became part of Telex. In 1971, the Bell System sold TWX to Western Union. TWX transmitted 5-bit Murray code or 7-bit ASCII code at up to 150 bps. See Telex. ) today reported financial results for its fourth quarter and full year ended December December: see month. 31, 2005. Chairman 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: "I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in pleased with our Company's 2005 financial performance that drew strength from across our businesses -- led by double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. gains at our Cable and Networks segments. We achieved all of our full-year financial objectives, and each of our businesses made significant progress against its respective operating and competitive goals. In 2005, our film studios combined to top the domestic and global box offices as well as U.S. home video sales; 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) continued to lead their competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. in key audiences; and Time Inc. again ranked first in U.S. magazine advertising. 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. set new records in its video, data and voice subscription growth for the year, while we made important strategic progress at 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. . At the same time, we continued to allocate To reserve a resource such as memory or disk. See memory allocation. our capital to targeted high-growth, strategic opportunities inside and outside the Company, including our $12.5 billion stock repurchase plan stock repurchase plan 1. See buyback. 2. See self-tender. ." Mr. Parsons continued: "Our scale and closely related, industry-leading businesses give Time Warner significant competitive advantages and strategic flexibility in today's rapidly changing environment. In the coming year, we'll we'll Contraction of we will. we'll we will or we shall we'll will ~shall continue to derive de·rive v. 1. To obtain or receive from a source. 2. To produce or obtain a chemical compound from another substance by chemical reaction. real value from our unique opportunities and deliver on our top priority for our shareholders: to provide a highly competitive near-term near-term adj. Of, for, or involving a short period of time in the near future. return while building sustainable value Sustainable Value Sustainable Value is an approach to measure and manage sustainability performance. The concept was developed by researchers who are working today for Queen's University Belfast ." Full-Year Results Revenues rose 4% over 2004 to $43.7 billion, reflecting increases at the Company's Cable, Networks, Publishing and Filmed Entertainment reporting segments. Adjusted 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. before Depreciation and Amortization climbed to $10.7 billion, up 8% from $9.9 billion in the prior year, driven by double-digit growth at the Cable and Networks segments as well as gains at the AOL and Publishing segments. Operating Income decreased to $4.5 billion in 2005 from $6.2 billion in 2004 - reflecting primarily the costs associated with securities litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , offset partly by the growth in Adjusted Operating Income before Depreciation and Amortization. Cash Provided by Operations amounted to $5.0 billion, and Free Cash Flow grew to $4.4 billion. As of December 31, Net Debt was $16.1 billion, essentially flat compared to the beginning of 2005, reflecting payments made in connection with securities litigation and government investigations, repurchases of common stock and dividends. 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. Income per 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 Cumulative Effect of Accounting Change was $0.62 for the year ended December 31, 2005, compared to $0.68 in 2004. The current and prior year amounts included certain items affecting comparability that are described in detail in the Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Reported Net Income and Per Share Results section below. The net impact of such items was to decrease the current year results by $0.18 and the prior year results by $0.01 per diluted common share. Fourth-Quarter Results Revenues climbed 7% over the same period in 2004 to $11.9 billion, driven by increases at the Filmed Entertainment, Cable, Networks and Publishing segments. Adjusted Operating Income before Depreciation and Amortization rose 18% to $2.9 billion, reflecting double-digit increases at the Networks, Filmed Entertainment, Cable and Publishing segments. Operating Income improved 37% to $2.2 billion. Diluted Income per Common Share before Discontinued Operations and Cumulative Effect of Accounting Change was $0.29 for the three months ended December 31, 2005, compared to $0.24 in last year's fourth quarter. The current and prior year amounts included certain items affecting comparability that are described in detail in the Consolidated Reported Net Income and Per Share Results section below. The net impact of such items was to increase both the current and prior year results by $0.04 per diluted common share. Update on $12.5 Billion Stock Repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. Program The Board of Directors last year authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a $12.5 billion stock repurchase program that is scheduled to run to August 2007. From inception INCEPTION. The commencement; the beginning. In making a will, for example, the writing is its inception. 3 Co. 31 b; Plowd. 343. Vide Consummation; Progression. through January January: see month. 31, 2006, the Company has repurchased approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 167 million shares of common stock for approximately $3.0 billion. Purchases for the stock repurchase program may be made from time to time on the open market and in privately negotiated transactions. Size and timing of these purchases will be based on such factors as price and business and market conditions. Performance of Segments The schedules below reflect Time Warner's performance for the three months and full year ended December 31, by line of business (in millions):
Three and Twelve Months Ended December 31:
Three Months Ended Twelve Months Ended
December 31, December 31,
Revenues: 2005 2004 2005 2004
------- ------- ------- -------
AOL $ 2,012 $ 2,183 $ 8,283 $ 8,692
Cable 2,500 2,204 9,498 8,484
Filmed Entertainment 3,624 3,272 11,924 11,853
Networks 2,439 2,293 9,611 9,054
Publishing 1,727 1,638 5,846 5,565
Intersegment Eliminations (415) (481) (1,510) (1,559)
------- ------- ------- -------
Total Revenues $11,887 $11,109 $43,652 $42,089
======= ======= ======= =======
Adjusted Operating Income before Depreciation and Amortization(a):
AOL(b) $ 342 $ 326 $ 1,913 $ 1,762
Cable 985 887 3,652 3,278
Filmed Entertainment(c) 402 284 1,284 1,474
Networks(d) 811 663 2,999 2,701
Publishing(e) 448 405 1,251 1,188
Corporate(f)(g) (136) (116) (430) (484)
Intersegment Eliminations 19 (18) (7) (22)
------- ------- ------- -------
Total Adjusted Operating
Income before Depreciation
and Amortization(a) $ 2,871 $ 2,431 $10,662 $ 9,897
======= ======= ======= =======
Operating Income:
AOL(b) $ 174 $ 120 $ 1,168 $ 934
Cable 555 497 1,988 1,764
Filmed Entertainment(c) 307 201 943 1,157
Networks(d) 741 602 2,738 2,461
Publishing(e) 392 341 1,028 934
Corporate(f)(g) (148) (127) (474) (527)
Legal recoveries/(expenses)(h) 160 (13) (2,865) (536)
Intersegment Eliminations 19 (18) (7) (22)
------- ------- ------- -------
Total Operating Income $ 2,200 $ 1,603 $ 4,519 $ 6,165
======= ======= ======= =======
(a) Adjusted Operating Income before Depreciation and Amortization
excluded the impact of noncash impairments of goodwill, intangible
and fixed assets, as well as gains and losses on asset sales and
amounts related to securities litigation and government
investigations. Refer to the reconciliations of Adjusted Operating
Income before Depreciation and Amortization to Operating Income
before Depreciation and Amortization on pages 15 and 16. Operating
Income included these items in their respective periods.
(b) For the twelve months ended December 31, 2005, Adjusted Operating
Income before Depreciation and Amortization excluded a noncash
goodwill impairment charge of $24 million related to America
Online Latin America, Inc., a $5 million gain related to the sale
of a building and a $5 million gain related to the 2004 sale of
Netscape Security Solutions; for the three and twelve months ended
December 31, 2004, Adjusted Operating Income before Depreciation
and Amortization excluded a $7 million gain on the sale of
Netscape Security Solutions; for the twelve months ended December
31, 2004, Adjusted Operating Income before Depreciation and
Amortization excluded a $13 million gain on the sale of AOL Japan
and a noncash impairment charge of $10 million related to a
building that was held for sale. Operating Income included these
amounts in their respective periods.
(c) For the three and twelve months ended December 31, 2005, Adjusted
Operating Income before Depreciation and Amortization excluded a
$5 million gain related to the sale of a property in California at
Filmed Entertainment. Operating Income included this amount in
both periods.
(d) For the twelve months ended December 31, 2004, Adjusted Operating
Income before Depreciation and Amortization excluded a loss of
approximately $7 million related to the sale of the winter sports
teams. Operating Income included this amount in the period.
(e) For the twelve months ended December 31, 2005, Adjusted Operating
Income before Depreciation and Amortization excluded an $8 million
gain related to the collection of a loan made in conjunction with
the Company's 2003 sale of Time Life Inc., which was previously
fully reserved due to concerns about recoverability; for the
twelve months ended December 31, 2004, Adjusted Operating Income
before Depreciation and Amortization excluded an $8 million gain
related to the sale of a building. Operating Income included these
items in their respective periods.
(f) For the three and twelve months ended December 31, 2005, Adjusted
Operating Income before Depreciation and Amortization excluded
$160 million in net recoveries and $2.9 billion in net expenses,
respectively, related to securities litigation and government
investigations; for the three and twelve months ended December 31,
2004, Adjusted Operating Income before Depreciation and
Amortization excluded $13 million and $536 million, respectively,
in net expenses related to securities litigation and government
investigations.
(g) For the twelve months ended December 31, 2004, Adjusted Operating
Income before Depreciation and Amortization and Operating Income
included $53 million of costs associated with the relocation from
the Company's former corporate headquarters, of which
approximately $4 million was reversed in the twelve months ended
December 31, 2005, as updated estimates indicated they would no
longer be incurred.
(h) Represented amounts related to securities litigation and
government investigations. For segment reporting purposes in the
Company's financial statements, amounts are reflected in the
results of the Corporate segment. For the three and twelve months
ended December 31, 2005, amounts included $160 million in net
recoveries and $2.9 billion in net expenses, respectively, related
to securities litigation and government investigations. For the
three and twelve months ended December 31, 2004, amounts included
$13 million and $536 million, respectively, in net expenses
related to securities litigation and government investigations.
Presented below is a discussion of Time Warner's segments for the fourth quarter and full year 2005. Unless otherwise noted, the dollar amounts in parentheses See parenthesis. parentheses - See left parenthesis, right parenthesis. represent year-over-year changes. AOL (America Online See AOL. ) Full-Year Results Revenues declined 5% ($409 million) to $8.3 billion, reflecting a 10% decrease ($722 million) in Subscription revenues, offset in part by a 33% increase ($333 million) in Advertising revenues. Driving the growth in Advertising revenues were higher revenues from Advertising.com ($162 million), which was acquired on August 2, 2004, as well as a 35% rise ($116 million) in paid search and an increase in traditional advertising. The decline in Subscription revenues was due to a decrease in domestic AOL brand members as well as unfavorable changes in the price plan mix of AOL brand subscribers. Adjusted Operating Income before Depreciation and Amortization climbed 9% ($151 million) to $1.9 billion, benefiting from reductions in network ($485 million) and marketing expenses, as well as higher Advertising revenues, offset partially by lower domestic Subscription revenues. The current and prior year periods reflected net 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. of $10 million and $50 million, respectively. Operating Income grew 25% ($234 million) to $1.2 billion, due to the increase in Adjusted Operating Income before Depreciation and Amortization as well as lower depreciation expense ($105 million). Fourth-Quarter Results Revenues decreased 8% ($171 million) to $2.0 billion. Adjusted Operating Income before Depreciation and Amortization rose 5% ($16 million) to $342 million. The current and prior year quarters reflected restructuring charges of $15 million and $52 million, respectively. The 2004 period also included a $56 million reserve reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its related to the extension of the moratorium A suspension of activity or an authorized period of delay or waiting. A moratorium is sometimes agreed upon by the interested parties, or it may be authorized or imposed by operation of law. on 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 sales taxes sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. (Internet Tax Nondiscrimination Act The Internet Tax Nondiscrimination Act, Pub.L. 108-435, is the current U.S. federal law that bans Internet taxes in the United States. Signed into law on December 3, 2004, by President George Bush, it extended until 2007 the then-current moratorium on new and discriminatory taxes ). This reversal had no meaningful full-year impact, as the reserve was primarily accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. earlier in 2004. Operating Income grew 45% ($54 million) to $174 million, benefiting from the increase in Adjusted Operating Income before Depreciation and Amortization as well as lower depreciation ($33 million) and amortization ($12 million) expenses. Highlights As of December 31, 2005, the AOL service totaled 19.5 million U.S. members, a decline of 625,000 from the prior quarter and 2.8 million from the year-ago quarter. 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). , the AOL service had 6.0 million
members, a decrease of 108,000 from the previous quarter and a decline
of 287,000 from last year's quarter.During the fourth quarter, AOL had 109 million average monthly domestic unique visitors A count of how many different people access a Web site. For example, if a user leaves and comes back to the site five times during the measurement period, that person is counted as one unique visitor, but would count as five "user sessions. and 54 billion page views, 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. comScore comScore is an internet marketing research company that provides marketing data and services to many of the internet's largest businesses [1]. comScore tracks all internet data on its surveyed computers in order to study online behavior. Media Metrix, which translates into 164 average monthly page views per unique visitor. CABLE (Time Warner Cable) Full-Year Results Revenues rose 12% ($1.0 billion) to $9.5 billion, representing a 12% increase ($995 million) in Subscription revenues and a 4% climb ($19 million) in Advertising revenues. Subscription revenues benefited from a 22% increase ($385 million) in 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. data revenues, significant growth in Digital Phone revenues ($253 million) and an 18% rise ($121 million) in enhanced digital video revenues as well as higher basic cable rates. Average monthly revenue per basic cable subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. climbed 12% to approximately $85. Operating Income before Depreciation and Amortization increased 11% ($374 million) to $3.7 billion, due to the growth in Revenues, offset in part by a 10% rise in programming expenses ($195 million) and higher general operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for new services. The current year includes merger-related and restructuring charges of $42 million. The prior year included legal settlement costs of $34 million related to Urban Cable. Operating Income climbed 13% ($224 million) to $2.0 billion, reflecting the increase in Operating Income before Depreciation and Amortization, offset partly by higher depreciation expense ($150 million). Fourth-Quarter Results Revenues rose 13% ($296 million) to $2.5 billion. Operating Income before Depreciation and Amortization grew 11% ($98 million) to $985 million. The fourth quarter included a 6% ($28 million) increase in programming expenses, which reflected a net benefit of approximately $25 million primarily associated with changes in programming estimates (a portion of which were accrued earlier in 2005). The quarter also included $9 million of merger-related and restructuring charges. Operating Income climbed 12% ($58 million) to $555 million, offset partly by higher depreciation expense ($41 million). Subscriber Update As of December 31, 2005, Time Warner Cable managed nearly 11.0 million basic video cable subscribers, which included approximately 1.6 million subscribers in unconsolidated joint ventures. Basic video cable subscribers climbed 34,000 from the prior quarter (the highest fourth-quarter growth since 2002) and 73,000 from the year-ago quarter. Digital video subscribers grew 199,000 in the quarter (the largest fourth-quarter increase since 2002) and 595,000 in the full year for a total of 5.4 million, representing 49% of basic video cable subscribers. Digital Video Recorder See DVR. subscribers rose 219,000 during the quarter (the largest quarterly increase ever) and 621,000 for the full year to 1.5 million subscribers, serving 27% of digital video customers. Residential high-speed data subscribers grew by 265,000 during the quarter and 909,000 in the full year for a total of 4.8 million, representing 25% of service-ready homes passed. This marks the largest fourth-quarter increase since 2002, and it is the fourth consecutive quarter in which net residential high-speed data subscriber additions surpassed 200,000. Digital Phone subscribers climbed 246,000 in the quarter (the largest quarterly increase ever) and 880,000 in the full year for a total of 1.1 million, representing 7% of eligible homes passed. FILMED ENTERTAINMENT (Warner Bros BROS Brothers BROS Benefits and Retirement Operations Section (King County, Washington) BROS Barnes and Richmond Operatic Society (London, UK) . Entertainment & New Line Cinema) Full-Year Results Revenues increased 1% ($71 million) to $11.9 billion. The current year benefited from growth in home video revenue from television product, record international television distribution results at Warner Bros. and a strong domestic theatrical slate. These items more than offset difficult comparisons to the prior year's industry record international theatrical performance at Warner Bros., which included Harry Potter A potter is someone who makes pottery. Potter may also refer to: People
Troy, ancient city made famous by Homer's account of the Trojan War. It is also called Ilion or, in Latin, Ilium. Its site is almost universally accepted as the mound now named Hissarlik, in Asian Turkey, c.4 mi (6. and The Last Samurai samurai (sä'm  rī`), knights of feudal Japan, retainers of the daimyo. This aristocratic warrior class arose during the 12th-century wars between the Taira and Minamoto clans and was , as
well as higher international overages from New Line's The Lord of
the Rings trilogy A company founded in 1979 by Gene Amdahl to commercialize wafer scale integration and build supercomputers. It raised a quarter of a billion dollars, the largest startup funding in history, but could not create its 2.5" superchip. and higher domestic network and syndication See syndication format. revenues
from episodic episodicsporadic; occurring in episodes. e. falling a paroxymal disorder described in Cavalier King Charles spaniels in which affected dogs, starting at an early age, experience episodes of extensor rigidity, possibly brought on by stress. e. television properties, most notably Friends, The Drew Carey Drew Allison Carey (born May 23, 1958) is an American comedian, actor, and game show host. After serving in the U.S. Marines and making a name for himself in stand-up comedy, Carey eventually gained popularity starring on his own sitcom, The Drew Carey Show Show and Seinfeld
Adjusted Operating Income before Depreciation and Amortization decreased 13% ($190 million) to $1.3 billion. This decline is due to difficult comparisons to the prior year contributions from The Lord of the Rings trilogy, domestic television syndication results and the international theatrical slate. The current year includes restructuring charges of $33 million. Operating Income declined 18% ($214 million) to $943 million, due to the decrease in Adjusted Operating Income before Depreciation and Amortization as well as higher depreciation and amortization expenses. Fourth-Quarter Results Revenues climbed 11% ($352 million) to $3.6 billion. Adjusted Operating Income before Depreciation and Amortization grew 42% ($118 million) to $402 million. The current year quarter reflected restructuring charges of $33 million. Operating Income rose 53% ($106 million) to $307 million, driven by higher Adjusted Operating Income before Depreciation and Amortization, offset partially by increases in amortization and depreciation expenses. Achievements For the fifth consecutive year, Time Warner's studios combined for the #1 position in global box office. In domestic box office, Time Warner's studios captured an industry-leading share of 21.7% in 2005, with four films each generating more than $200 million in domestic box office receipts - Warner Bros.' Harry Potter and the Goblet of Fire, Charlie and the Chocolate chocolate, general term for the products of the seeds of the cacao or chocolate tree, used for making beverages or confectionery. The flavor of chocolate depends not only on the quality of the cocoa nibs (the remainder after the seeds are fermented, dried, and Factory and Batman Begins as well as New Line's Wedding Crashers. Warner Bros. Pictures earned first place in both the domestic ($1.4 billion) and international ($1.9 billion) box offices in 2005. Internationally, Warner Bros. Pictures has grossed over a billion dollars a year for five years in a row and led in international box office in four of the past five years. 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 for the fifth consecutive year, garnering an industry-leading 21.4% share of home video sales in the U.S. Notable 2005 home video releases included Warner Bros.' The Polar Express, Batman Begins, Charlie and the Chocolate Factory, Troy and Ocean's Twelve and New Line's The Notebook See notebook computer. 1. (computer) notebook - laptop computer. 2. (tool) notebook - Labtech Notebook. and Monster-in-Law. At the 63rd Annual Golden Globe Awards, Warner Bros. Pictures received the Best Supporting Actor supporting actor n → attore m non protagonista award for George George, river, c.345 mi (560 km) long, rising in a lake on the Quebec-Labrador boundary, E Canada. It flows N through Indian Lake (125 sq mi/324 sq km) to Ungava Bay (an arm of Hudson Strait). Clooney's performance in Syriana, and Warner Independent Pictures' Paradise Paradise, town, United States Paradise, uninc. town (1990 pop. 25,406), Butte co., N central Calif., in the foothills of the Sierra Nevada range. It is mainly residential with a growing population. Now was named the Best Foreign Language Film. Among the nominations for the 78th Annual Academy Awards are six for Warner Independent Pictures' Good Night, And Good Luck, as well as one each for March of the Penguins and Paradise Now. At Warner Bros. Pictures, Batman Begins, Charlie and the Chocolate Factory, Harry Potter and the Goblet of Fire, North Country, Syriana and Tim Burton's Corpse Bride This article is about the female participant in a wedding. For other uses, see Bride (disambiguation). A bride is a female participant in a wedding ceremony: a woman about to be married, currently being married, or, in some uses, very recently married. all garnered nominations. And New Line's A History of Violence and The New World received a total of three nominations. NETWORKS (Turner Turner can refer to:
A form of oxygen therapy in which the patient breathes oxygen in a pressurized chamber. Mentioned in: Ozone Therapy & The WB Network) Full-Year Results Revenues rose 6% ($557 million) to $9.6 billion, benefiting from growth in Subscription, Advertising and Content revenues. Subscription revenues climbed 7% ($347 million), due to higher rates and, to a lesser extent, increased subscribers at Turner and HBO. These subscription gains were offset in part by the lower net effect of resolving certain contractual agreements ($22 million in the current year compared to approximately $50 million last year). The 7% growth ($191 million) in Advertising revenues included an 11% rise at the Turner networks, offset partly by a 9% decline at The WB Network. Content revenues climbed 4% ($41 million), due mainly to higher ancillary Subordinate; aiding. A legal proceeding that is not the primary dispute but which aids the judgment rendered in or the outcome of the main action. A descriptive term that denotes a legal claim, the existence of which is dependent upon or reasonably linked to a main claim. sales of HBO's original programming, offset in part by lower licensing revenue associated with fewer episodes of Everybody Loves Raymond Everybody Loves Raymond is an American sitcom originally broadcast on CBS from 1996 to 2005. It is one of the most critically acclaimed American sitcoms of its time. and the absence of revenue ($22 million) from Turner's winter sports winter sports: see bobsledding; curling; hockey, ice; ice dancing; ice skating; skiing; snowshoes; tobogganing. teams and arena, which were sold in the first quarter of 2004. Adjusted Operating Income before Depreciation and Amortization grew 11% ($298 million) to $3.0 billion, reflecting higher Subscription, Advertising and Content revenues, offset partially by an increase in programming expenses ($101 million), due to higher costs for original series and sports rights at Turner and a rise in overall general operating expenses. The current year includes restructuring charges of $4 million. The prior year included a $75 million benefit related to bad debt reserve reversals associated with the Adelphia A`del´phi`a n. 1. (Bot.) A "brotherhood," or collection of stamens in a bundle; - used in composition, as in the class names, Monadelphia, Diadelphia, etc. s> bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most . Operating Income climbed 11% ($277 million) to $2.7 billion, benefiting from the increase in Adjusted Operating Income before Depreciation and Amortization, offset partially by higher depreciation expense. Fourth-Quarter Results Revenues grew 6% ($146 million) to $2.4 billion. Operating Income before Depreciation and Amortization climbed 22% ($148 million) to $811 million. The current year quarter reflected restructuring charges of $4 million. Operating Income rose 23% ($139 million) to $741 million, reflecting the increase in Operating Income before Depreciation and Amortization, offset in part by higher depreciation expense. Achievements For the year, TNT was the leader in adults 18-49 and adults 25-54 in prime-time and total day - setting new advertising-supported cable records in both categories for the best ever annual delivery. In 2005, TBS ranked #1 in prime-time delivery among adults 18-34 and aired the four top comedies on advertising-supported cable among adults 18-49 - Sex and the City, Everybody Loves Raymond, Seinfeld and Friends. In its first year as an individually rated network, Adult Swim Adult Swim is the name for an adult-oriented television programming network. It shares channel space with Cartoon Network in the United States, featuring absurdist and often ribald comedy, in contrast to the much tamer child and pre-teen oriented daytime Cartoon Network. led in total day delivery among adults 18-34. No advertising-supported cable network has ever delivered as many adult 18-34 viewers VIEWERS. Persons appointed by the courts to see and examine certain matters, and make a report of the facts together with their opinion to the court. In practice they are usually appointed to lay out roads and the like. Vide Experts. . HBO earned three Golden Globe awards in 2006, with two for Empire Falls For the TV miniseries based on the novel, see Empire Falls (miniseries) Empire Falls is a 2001 novel written by Richard Russo. It won the Pulitzer Prize for Fiction in 2002. and one for Lackawanna Lackawanna, city, United States Lackawanna (lăkəwä`nə), city (1990 pop. 20,585), Erie co., W N.Y., on Lake Erie; inc. 1909. Blues. HBO earned three Academy Award nominations for The Death of Kevin KEVIN Keepers of the Eternal Vigilance of the Islamic Nation (fictional, from White Teeth by Zadie Smith) Carter: Casualty of the Bang Bang Club, The Mushroom mushroom, type of basidium fungus characterized by spore-bearing gills on the underside of the umbrella- or cone-shaped cap. The name toadstool is popularly reserved for inedible or poisonous mushrooms, but this classification has no scientific basis. Club and The Moon and the Son: An Imagined Conversation. PUBLISHING (Time Inc.) Full-Year Results Revenues were up 5% ($281 million) to $5.8 billion, reflecting a 5% increase ($134 million) in Advertising revenues and an 18% climb ($99 million) in Content revenues, driven by Time Warner Book Group. Advertising revenues benefited from the acquisitions of Essence and Grupo Editorial Expansion, higher contributions from recent magazine launches, led by Life, and strength at Real Simple and People, offset partially by lower revenues at certain magazines, including 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. and Time. Adjusted Operating Income before Depreciation and Amortization rose 5% ($63 million) to $1.3 billion, due primarily to growth at Time Warner Book Group, 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. and Real Simple, offset in part by restructuring charges of $28 million, a decline at Time and greater start-up Start-up The earliest stage of a new business venture. losses ($12 million). Operating Income climbed 10% ($94 million) to $1.0 billion, benefiting from the increase in Adjusted Operating Income before Depreciation and Amortization and lower amortization expense ($41 million). Fourth-Quarter Results Revenues increased 5% ($89 million) to $1.7 billion. Operating Income before Depreciation and Amortization rose 11% ($43 million) to $448 million. The current year quarter reflected restructuring charges of $28 million. Operating Income climbed 15% ($51 million) to $392 million, driven by the increase in Operating Income before Depreciation and Amortization and lower amortization expense. Achievements Based on Publishers Information Bureau (PIB See NIST binary. ) data, Time Inc.'s 2005 industry-leading share of overall domestic advertising was 23.4%, exclusive of newspaper supplements. People was named Advertising Age's 2005 "Magazine of the Year," with Real Simple ranked second. (Real Simple has made the list four straight years.) IPC (1) (InterProcess Communication) The exchange of data between one program and another either within the same computer or over a network. It implies a protocol that guarantees a response to a request. Media's Pick Me Up won the British Society of Magazine Editors' Launch of the Year award. This is the second year in a row IPC received this award (Nuts in 2004). Time Warner Book Group added 16 titles to the New York Times bestseller list this quarter - with seven titles at #1, including 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 Mary Mary, the mother of Jesus Mary, in the Bible, mother of Jesus. Christian tradition reckons her the principal saint, naming her variously the Blessed Virgin Mary, Our Lady, and Mother of God (Gr., theotokos). Her name is the Hebrew Miriam. , Mary, Nicholas Nicholas, Russian grand duke Nicholas (Nikolai Nikolayevich) (nyĭkəlī` nyĭkəlī`əvĭch), 1856–1929, Russian grand duke and army officer; first cousin of Czar Alexander III and grandson of Czar Sparks' At First Sight, Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. Connelly's The Lincoln Lincoln, city and district, England Lincoln, city (1991 pop. 79,980) and district, Lincolnshire, E England, in the Parts of Kesteven, on the Witham River. Lawyer and Joel Joel, book of the Bible Joel, prophetic book of the Bible. It is a collection of the oracles of an otherwise unknown prophet, dated variously from the 9th to the 3d cent. B.C., though a date in c.400 B.C. is likely. Osteen's Your Best Life Now - bringing the 2005 total to a record 69 titles. Consolidated Reported Net Income and Per Share Results Full-Year Results For the year ended December 31, 2005, the Company reported Net Income of $2.9 billion, or $0.62 per diluted common share. This compares to 2004 Net Income of $3.4 billion, or $0.72 per diluted common share. For the year ended December 31, 2005, the Company reported Income before Discontinued Operations and Cumulative Effect of Accounting Change of $2.9 billion, or $0.62 per diluted common share. This compares to Income before Discontinued Operations and Cumulative Effect of Accounting Change in 2004 of $3.2 billion, or $0.68 per diluted common share. Certain pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta items in the current year affected comparability, including $2.9 billion in net expenses related to securities litigation and government investigations, a $24 million 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. related to AOL 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. and a $13 million writedown writedown A reduction in the value of an asset carried on a firm's financial statements. For example, the firm's accountants, believing the inventory is overvalued, may decide to take a writedown by reducing inventory valuation. on an investment in NTV NTV Nippon Television Network Corporation (Japan) nTV National Television NTV Nepal Television NTV Newfoundland Television NTV Non-Tactical Vehicle NTV Nerve Tissue Vaccine NTV Notice to Vacate , offset in part by a $53 million gain related to an increase in fair value of the option in 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. , an $8 million gain related to the collection of a loan made in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the Company's 2003 sale of Time Life, a $5 million gain on the sale of a building at AOL and a $5 million gain related to the sale of 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 Netscape (1) (Netscape Communications Corporation, Mountain View, CA, www.netscape.com) Part of America Online (AOL), Netscape specializes in Web software, including the Netscape Web browser. Security Solutions business, as well as a $5 million gain on the sale of a property in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). at Filmed Entertainment. The current year also included a $925 million gain on the sale of an investment in Google (Google, Mountain View, CA, www.google.com) The largest search engine on the Web, founded by Larry Page and Sergey Brin, two Stanford University students. In 1996, they developed their "BackRub" search engine, named after its unique page ranking method (explained below). , a $44 million gain related to the sale of an investment in Columbia Columbia, cities, United States Columbia (kəlŭm`bēə). 1 City (1990 pop. 75,883), Howard co., central Md., between Washington, D.C., and Baltimore. House and $55 million in other net investment gains. In addition, the current year's income tax provision benefited from $481 million related to certain state tax law changes and state tax methodologies and the recognition of net capital loss carryforwards Loss Carryforward An accounting technique with which a company applies net operating losses of the current year to future year's profits in order to reduce tax liability. Notes: . Certain items in the prior year similarly affected comparability, including $536 million in net expenses related to securities litigation and government investigations, a $10 million impairment related to the sale of a building at America Online and an approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. $7 million loss on the sale of Turner's winter sports teams, offset in part by a $50 million gain related to an increase in fair value of the option in Warner Music Group and gains of $13 million, $8 million and $7 million on the sales of AOL Japan, a Time Inc. building, and America Online's Netscape Security Solutions business, respectively. The prior year also reflected $424 million in pre-tax net investment gains, which included $188 million, $113 million and $44 million related to the sale of investments in Google, VIVA vi·va interj. Used to express acclamation, salute, or applause. [Italian and Spanish, (long) live, both from Latin v and Gateway, respectively, as well as a $110 million tax benefit associated with the realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of net capital loss carryforwards. In aggregate, the items noted above had the net effect of decreasing the current year's Income before Discontinued Operations and Cumulative Effect of Accounting Change by $849 million (net of taxes), or $0.18 per diluted common share, and decreasing the previous year's Income before Discontinued Operations and Cumulative Effect of Accounting Change by $33 million (net of taxes), or $0.01 per diluted common share. Excluding such items, the growth in Income before Discontinued Operations and Cumulative Effect of Accounting Change and Diluted Income per Common Share before Discontinued Operations and Cumulative Effect of Accounting Change was driven primarily by an increase in Operating Income and lower interest expense, offset partly by a higher tax provision. Fourth-Quarter Results For the three months ended December 31, 2005, the Company reported Net Income of $1.4 billion, or $0.29 per diluted common share. This compares to Net Income in the 2004 comparable quarter of $1.1 billion, or $0.24 per diluted common share. For the three months ended December 31, 2005, the Company reported Income before Discontinued Operations and Cumulative Effect of Accounting Change of $1.4 billion, or $0.29 per diluted common share. This compares to Income before Discontinued Operations and Cumulative Effect of Accounting Change in 2004 of $1.1 billion, or $0.24 per diluted common share. Certain pre-tax items in the current year affected comparability, including $160 million in net recoveries related to securities litigation and government investigations, a $5 million gain on the sale of a property in California at Filmed Entertainment and a $108 million benefit in the tax provision related to changes in state tax methodologies and the recognition of net capital loss carryforwards, offset in part by $4 million in net investment losses. Certain items in the prior year quarter similarly affected comparability, including $82 million in net investment gains (due primarily to a $44 million gain on the sale of the Gateway investment), a $50 million gain related to an increase in fair value of the option in Warner Music Group and a $7 million gain on the sale of America Online's Netscape Security Solutions business, offset partly by $13 million in net expenses related to securities litigation and government investigations. The prior year quarter's amount also included a $110 million tax benefit associated with the realization of net capital loss carryforwards. In aggregate, the items noted above had the net effect of increasing the current year quarter's Income before Discontinued Operations and Cumulative Effect of Accounting Change by $206 million (net of taxes), or $0.04 per diluted common share, and increasing the previous year period's Income before Discontinued Operations and Cumulative Effect of Accounting Change by $183 million (net of taxes), or $0.04 per diluted common share. Excluding such items, the growth in Income before Discontinued Operations and Cumulative Effect of Accounting Change and Diluted Income per Common Share before Discontinued Operations and Cumulative Effect of Accounting Change was driven primarily by an increase in Operating Income and lower interest expense, offset partly by a higher tax provision. Use of Operating Income before Depreciation and Amortization, Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow During the fourth quarter of 2005, the Company revised its definitions of Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow to exclude all of the amounts associated with the securities litigation and SEC/DOJ government investigations. In addition to legal reserves that have been previously excluded, Adjusted Operating Income before Depreciation and Amortization now excludes legal and professional expenses and insurance recoveries related to the securities litigation and government investigations. Similarly, in addition to payments related to securities litigation that have been previously excluded, Free Cash Flow now excludes legal and professional expenses and insurance recoveries related to the securities litigation and government investigations and payments for settlements related to the government investigations. These revised definitions have been applied for all periods presented. The Company utilizes Operating Income before Depreciation and Amortization, among other measures, to evaluate the performance of its businesses. The Company also evaluates the performance of its businesses using Operating Income before Depreciation and Amortization excluding the impact of noncash impairments of goodwill, intangible and fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → , as well as gains and losses on asset sales and amounts related to securities litigation and government investigations (referred to herein as Adjusted Operating Income before Depreciation and Amortization). Both Operating Income before Depreciation and Amortization and Adjusted Operating Income before Depreciation and Amortization are considered important indicators of the operational strength of the Company's businesses. Operating Income before Depreciation and Amortization eliminates the uneven effect across all business segments of considerable amounts of noncash 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. and amortization of certain 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. that were recognized in business combinations. A limitation of this measure, however, is that it does not reflect the periodic costs of certain 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. tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. and intangible assets used in generating revenues in the Company's businesses. Moreover, Adjusted Operating Income before Depreciation and Amortization does not reflect gains and losses on asset sales or amounts related to securities litigation and government investigations or any impairment charge related to goodwill, intangible assets and fixed assets. Management evaluates the investments in such tangible and intangible assets through other financial measures, such as capital expenditure budgets, investment spending levels and return on capital. Free Cash Flow is Cash Provided by Operations (as defined by U.S. 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 ) plus payments related to securities litigation and government investigations (net of any insurance recoveries), less cash flow attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to discontinued operations, capital expenditures and product development costs, principal payments on capital leases, and partnership distributions, if any. The Company uses Free Cash Flow to evaluate the performance of its businesses and this measure is considered an important indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of the Company's liquidity, including its ability to reduce net debt, make strategic investments, pay dividends to common shareholders and repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. stock. A limitation of this measure, however, is that it does not reflect payments made in connection with the securities litigation and government investigations, which reduce liquidity. Operating Income before Depreciation and Amortization, Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow should be considered in addition to, not as a substitute for, the Company's Operating Income, Net Income and various cash flow measures (e.g., Cash Provided by Operations), as well as other measures of financial performance and liquidity 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 U.S. generally accepted accounting principles. About Time Warner Inc. Time Warner Inc. is a leading media and entertainment company, whose businesses include interactive services, cable systems, filmed entertainment, television networks and publishing. Information on Business Outlook Release and Earnings Conference Call Time Warner Inc. issued a separate release today regarding its 2006 full-year business outlook. The Company's earnings conference call can be heard live at 8:30 am ET on Wednesday Wednesday: see week. , February February: see month. 1, 2006. To listen to the call, visit www.timewarner.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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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, and other factors affecting the operation of the businesses of Time Warner Inc. More detailed information about these factors may be found in filings by 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. and Quarterly Report on Form 10-Q Form 10-Q See 10-Q. . 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.
TIME WARNER INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
December 31, December 31,
2005 2004
-------------- ---------------
(millions, except
per share amounts)
ASSETS
Current assets
Cash and equivalents $ 4,220 $ 6,139
Restricted cash -- 150
Receivables, less allowances of
$2.225 and $2.109 billion 6,411 5,512
Inventories 1,806 1,737
Prepaid expenses and other current
assets 1,026 920
-------------- --------------
Total current assets 13,463 14,458
Noncurrent inventories and film costs 4,916 4,415
Investments, including available-for-
sale securities 3,518 4,703
Property, plant and equipment, net 13,676 13,094
Intangible assets subject to
amortization, net 3,522 3,892
Intangible assets not subject to
amortization 39,813 39,656
Goodwill 40,416 39,667
Other assets 3,151 3,273
-------------- --------------
Total assets $ 122,475 $ 123,158
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,380 $ 1,339
Participations payable 2,426 2,452
Royalties and programming costs payable 1,074 1,018
Deferred revenue 1,473 1,653
Debt due within one year 92 1,672
Other current liabilities 6,100 6,468
Current liabilities of discontinued
operations 43 50
-------------- --------------
Total current liabilities 12,588 14,652
Long-term debt 20,238 20,703
Deferred income taxes 15,138 14,943
Deferred revenue 681 749
Mandatorily convertible preferred stock -- 1,500
Other liabilities 5,324 4,288
Noncurrent liabilities of discontinued
operations 7 38
Minority interests 5,784 5,514
Shareholders' equity
Series LMCN-V common stock, $0.01 par
value, 87.2 and 105.7 million shares
outstanding 1 1
Time Warner common stock, $0.01 par
value, 4.498 and 4.483 billion shares
outstanding 45 45
Paid-in-capital 155,927 156,252
Accumulated other comprehensive
income, net (64) 106
Accumulated deficit (93,194) (95,633)
-------------- --------------
Total shareholders' equity 62,715 60,771
-------------- --------------
Total liabilities and shareholders'
equity $ 122,475 $ 123,158
============== ==============
Note: Certain reclassifications have been made to the prior year's
financial information to conform to the December 31, 2005
presentation.
See accompanying notes.
TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
(millions, except per share amounts)
Revenues:
Subscription $ 5,577 $ 5,437 $ 22,222 $ 21,605
Advertising 2,169 2,016 7,612 6,955
Content 3,778 3,348 12,615 12,350
Other 363 308 1,203 1,179
--------- --------- --------- ---------
Total revenues 11,887 11,109 43,652 42,089
Costs of revenues (6,772) (6,490) (25,075) (24,449)
Selling, general and
administrative (2,840) (2,799) (10,478) (10,274)
Amortization of intangible
assets (151) (159) (597) (626)
Amounts related to
securities litigation and
government investigations 160 (13) (2,865) (536)
Merger-related and
restructuring costs (89) (52) (117) (50)
Asset impairments -- -- (24) (10)
Gains on disposal of assets,
net 5 7 23 21
--------- --------- --------- ---------
Operating income 2,200 1,603 4,519 6,165
Interest expense, net (314) (374) (1,266) (1,533)
Other income, net 15 153 1,124 521
Minority interest expense,
net (83) (74) (285) (246)
--------- --------- --------- ---------
Income before income taxes,
discontinued operations and
cumulative effect of
accounting change 1,818 1,308 4,092 4,907
Income tax provision (452) (187) (1,187) (1,698)
--------- --------- --------- ---------
Income before discontinued
operations and cumulative
effect of accounting change 1,366 1,121 2,905 3,209
Discontinued operations, net
of tax -- 6 -- 121
--------- --------- --------- ---------
Income before cumulative
effect of accounting change 1,366 1,127 2,905 3,330
Cumulative effect of
accounting change, net of
tax -- -- -- 34
--------- --------- --------- ---------
Net income $ 1,366 $ 1,127 $ 2,905 $ 3,364
========= ========= ========= =========
Basic income per common
share before discontinued
operations and cumulative
effect of accounting
change $ 0.29 $ 0.24 $ 0.62 $ 0.70
Discontinued operations -- 0.01 -- 0.03
Cumulative effect of
accounting change -- -- -- 0.01
--------- --------- --------- ---------
Basic net income per common
share $ 0.29 $ 0.25 $ 0.62 $ 0.74
========= ========= ========= =========
Average basic common shares 4,635.3 4,576.4 4,648.2 4,560.2
========= ========= ========= =========
Diluted income per common
share before discontinued
operations and cumulative
effect of accounting
change $ 0.29 $ 0.24 $ 0.62 $ 0.68
Discontinued operations -- -- -- 0.03
Cumulative effect of
accounting change -- -- -- 0.01
--------- --------- --------- ---------
Diluted net income per
common share $ 0.29 $ 0.24 $ 0.62 $ 0.72
========= ========= ========= =========
Average diluted common
shares 4,672.1 4,706.8 4,710.0 4,694.7
========= ========= ========= =========
Cash dividends declared per
share of common stock $ 0.05 $ -- $ 0.10 $ --
========= ========= ========= =========
Note: Certain reclassifications have been made to the prior year's
financial information to conform to the December 31, 2005
presentation.
See accompanying notes.
TIME WARNER INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Unaudited)
2005 2004
------------- -------------
OPERATIONS (millions)
Net income(a) $ 2,905 $ 3,364
Adjustments for noncash and
nonoperating items:
Cumulative effect of accounting
change, net of tax -- (34)
Depreciation and amortization 3,277 3,207
Amortization of film costs 3,513 3,547
Asset impairments 25 10
Gain on investments and other
assets, net (1,086) (432)
Equity in (income) losses of
investee companies, net of cash
distributions (14) 20
Legal reserves related to securities
litigation and government
investigations 111 300
Changes in operating assets and
liabilities, net of acquisitions (3,756) (3,366)
Adjustments relating to discontinued
operations (10) 2
------------- -------------
Cash provided by operations(b)(c) 4,965 6,618
------------- -------------
INVESTING ACTIVITIES
Investments and acquisitions, net of
cash acquired (680) (877)
Capital expenditures and product
development costs (3,246) (3,024)
Investment proceeds from available-for-
sale securities 991 532
Other investment proceeds 439 2,866
------------- -------------
Cash used by investing activities (2,496) (503)
------------- -------------
FINANCING ACTIVITIES
Borrowings 6 1,320
Debt repayments (1,995) (4,523)
Proceeds from exercise of stock options 307 353
Principal payments on capital leases (118) (191)
Repurchases of common stock (2,141) --
Dividends paid (466) --
Other 19 25
------------- -------------
Cash used by financing activities (4,388) (3,016)
------------- -------------
INCREASE (DECREASE) IN CASH AND
EQUIVALENTS (1,919) 3,099
CASH AND EQUIVALENTS AT BEGINNING OF
PERIOD 6,139 3,040
------------- -------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 4,220 $ 6,139
============= =============
(a) Includes net income from discontinued operations of $121 million
for the year ended December 31, 2004.
(b) 2005 includes $2.754 billion in payments related to securities
litigation and the government investigations. 2004 includes $236
million in payments related to securities litigation and the
government investigations.
(c) 2005 includes an approximate $36 million use of cash related to
changing the fiscal year end of certain international operations
from November 30 to December 31.
Note: Certain reclassifications have been made to the prior year's
financial information to conform to the December 31, 2005
presentation.
See accompanying notes.
TIME WARNER INC.
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION TO OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
(millions, unaudited)
Three Months Ended December 31, 2005
Adjusted
Operating Amounts
Income/(Loss) Related
Before To Securities
Depreciation Litigation
And Asset & Government
Amortization Impairments Investigations
------------ ----------- --------------
AOL $ 342 $ - $ -
Cable 985 - -
Filmed Entertainment(a) 402 - -
Networks 811 - -
Publishing 448 - -
Corporate(b) (136) - 160
Intersegment elimination 19 - -
------------ ----------- --------------
Total $ 2,871 $ - $ 160
============ =========== ==============
Operating
Income/(Loss)
Gains/ Before
(Losses) Depreciation
From Asset And
Disposals Amortization
----------- ------------
AOL $ - $ 342
Cable - 985
Filmed Entertainment(a) 5 407
Networks - 811
Publishing - 448
Corporate(b) - 24
Intersegment elimination - 19
----------- ------------
Total $ 5 $ 3,036
=========== ============
Three Months Ended December 31, 2004
Adjusted
Operating Amounts
Income/(Loss) Related
Before To Securities
Depreciation Litigation
And Asset & Government
Amortization Impairments Investigations
------------ ----------- --------------
AOL(c) $ 326 $ - $ -
Cable 887 - -
Filmed Entertainment 284 - -
Networks 663 - -
Publishing 405 - -
Corporate(b) (116) - (13)
Intersegment elimination (18) - -
------------ ----------- --------------
Total $ 2,431 $ - $ (13)
============ =========== ==============
Operating
Income/(Loss)
Gains/ Before
(Losses) Depreciation
From Asset And
Disposals Amortization
----------- ------------
AOL(c) $ 7 $ 333
Cable - 887
Filmed Entertainment - 284
Networks - 663
Publishing - 405
Corporate(b) - (129)
Intersegment elimination - (18)
----------- ------------
Total $ 7 $ 2,425
=========== ============
(a) For the three months ended December 31, 2005, Operating Income
before Depreciation and Amortization includes a $5 million gain
related to the sale of a property in California.
(b) For the three months ended December 31, 2005, Operating Income
before Depreciation and Amortization includes $160 million in net
recoveries related to securities litigation and government
investigations. For the three months ended December 31, 2004,
Operating Income before Depreciation and Amortization includes $13
million in net expenses related to securities litigation and
government investigations.
(c) For the three months ended December 31, 2004, Operating Income
before Depreciation and Amortization includes a gain of $7 million
related to the sale of Netscape Security Solutions ("NSS").
TIME WARNER INC.
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION TO OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
(millions, unaudited)
Year Ended December 31, 2005
Adjusted
Operating Amounts
Income/(Loss) Related
Before To Securities
Depreciation Litigation
And Asset & Government
Amortization Impairments Investigations
------------ ----------- --------------
AOL(a) $ 1,913 $ (24) $ -
Cable 3,652 - -
Filmed Entertainment(b) 1,284 - -
Networks 2,999 - -
Publishing(c) 1,251 - -
Corporate(d) (430) - (2,865)
Intersegment elimination (7) - -
------------ ----------- --------------
Total $ 10,662 $ (24) $ (2,865)
============ =========== ==============
Operating
Income/(Loss)
Gains/ Before
(Losses) Depreciation
From Asset And
Disposals Amortization
----------- ------------
AOL(a) $ 10 $ 1,899
Cable - 3,652
Filmed Entertainment(b) 5 1,289
Networks - 2,999
Publishing(c) 8 1,259
Corporate(d) - (3,295)
Intersegment elimination - (7)
----------- ------------
Total $ 23 $ 7,796
=========== ============
Year Ended December 31, 2004
Adjusted
Operating Amounts
Income/(Loss) Related
Before To Securities
Depreciation Litigation
And Asset & Government
Amortization Impairments Investigations
------------ ----------- --------------
AOL(a) $ 1,762 $ (10) $ -
Cable 3,278 - -
Filmed Entertainment 1,474 - -
Networks(e) 2,701 - -
Publishing(c) 1,188 - -
Corporate(d) (484) - (536)
Intersegment elimination (22) - -
------------ ----------- --------------
Total $ 9,897 $ (10) $ (536)
============ =========== ==============
Operating
Income/(Loss)
Gains/ Before
(Losses) Depreciation
From Asset And
Disposals Amortization
----------- ------------
AOL(a) $ 20 $ 1,772
Cable - 3,278
Filmed Entertainment - 1,474
Networks(e) (7) 2,694
Publishing(c) 8 1,196
Corporate(d) - (1,020)
Intersegment elimination - (22)
----------- ------------
Total $ 21 $ 9,372
=========== ============
(a) For the year ended December 31, 2005, Operating Income before
Depreciation and Amortization includes a $24 million noncash
impairment charge related to goodwill associated with America
Online Latin America, Inc. ("AOLA"), an approximate $5 million
gain related to the sale of a building and a $5 million gain from
the resolution of a previously contingent gain related to the 2004
sale of NSS. For the year ended December 31, 2004, Operating
Income before Depreciation and Amortization includes a $10 million
noncash impairment charge related to a building that was held for
sale, a gain of $13 million related to the sale of AOL Japan and a
$7 million gain related to the sale of NSS.
(b) For the year ended December 31, 2005, Operating Income before
Depreciation and Amortization includes a $5 million gain related
to the sale of a property in California.
(c) For the year ended December 31, 2005, Operating Income before
Depreciation and Amortization includes an $8 million gain related
to the collection of a loan made in conjunction with the Company's
2003 sale of Time Life Inc. ("Time Life"), which was previously
fully reserved due to concerns about recoverability. For the year
ended December 31, 2004, Operating Income before Depreciation and
Amortization includes an $8 million gain related to the sale of a
building.
(d) For the year ended December 31, 2005, Operating Loss before
Depreciation and Amortization includes $3 billion in legal
reserves related to securities litigation and $135 million in net
recoveries related to securities litigation and government
investigations. For the year ended December 31, 2004, Operating
Income before Depreciation and Amortization includes $510 million
in legal reserves related to the government investigations and $26
million in net expenses related to securities litigation and
government investigations.
(e) For the year ended December 31, 2004, Operating Income before
Depreciation and Amortization includes an approximate $7 million
loss related to the sale of the winter sports teams.
TIME WARNER INC.
RECONCILIATION OF OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION TO OPERATING INCOME
(millions, unaudited)
Three Months Ended December 31, 2005
Operating
Income/(Loss)
Before
Depreciation
And Operating
Amortization Depreciation Amortization Income/(Loss)
------------- ------------ ------------ ------------
AOL $ 342 $ (131)$ (37)$ 174
Cable 985 (411) (19) 555
Filmed
Entertainment(a) 407 (32) (68) 307
Networks 811 (65) (5) 741
Publishing 448 (34) (22) 392
Corporate(b) 24 (12) - 12
Intersegment
elimination 19 - - 19
------------- ------------ ------------ ------------
Total $ 3,036 $ (685)$ (151)$ 2,200
============= ============ ============ ============
Three Months Ended December 31, 2004
Operating
Income/(Loss)
Before
Depreciation
And Operating
Amortization Depreciation Amortization Income/(Loss)
------------- ------------ ------------ ------------
AOL(c) $ 333 $ (164)$ (49)$ 120
Cable 887 (370) (20) 497
Filmed
Entertainment 284 (29) (54) 201
Networks 663 (57) (4) 602
Publishing 405 (32) (32) 341
Corporate(b) (129) (11) - (140)
Intersegment
elimination (18) - - (18)
------------- ------------ ------------ ------------
Total $ 2,425 $ (663)$ (159)$ 1,603
============= ============ ============ ============
(a) For the three months ended December 31, 2005, Operating Income
before Depreciation and Amortization and Operating Income include
a $5 million gain related to the sale of a property in California.
(b) For the three months ended December 31, 2005, Operating Income
before Depreciation and Amortization and Operating Income include
$160 million in net recoveries related to securities litigation
and government investigations. For the three months ended December
31, 2004, Operating Income before Depreciation and Amortization
and Operating Income include $13 million in net expenses related
to securities litigation and government investigations.
(c) For the three months ended December 31, 2004, Operating Income
before Depreciation and Amortization and Operating Income include
a gain of $7 million related to the sale of NSS.
TIME WARNER INC.
RECONCILIATION OF OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION TO OPERATING INCOME
(millions, unaudited)
Year Ended December 31, 2005
Operating
Income/(Loss)
Before
Depreciation
And Operating
Amortization Depreciation Amortization Income/(Loss)
------------- ------------ ------------ ------------
AOL(a) $ 1,899 $ (557)$ (174)$ 1,168
Cable 3,652 (1,588) (76) 1,988
Filmed
Entertainment(b) 1,289 (121) (225) 943
Networks 2,999 (238) (23) 2,738
Publishing(c) 1,259 (132) (99) 1,028
Corporate(d) (3,295) (44) - (3,339)
Intersegment
elimination (7) - - (7)
------------- ------------ ------------ ------------
Total $ 7,796 $ (2,680)$ (597)$ 4,519
============= ============ ============ ============
Year Ended December 31, 2004
Operating
Income/(Loss)
Before
Depreciation
And Operating
Amortization Depreciation Amortization Income/(Loss)
------------- ------------ ------------ ------------
AOL(a) $ 1,772 $ (662)$ (176)$ 934
Cable 3,278 (1,438) (76) 1,764
Filmed
Entertainment 1,474 (104) (213) 1,157
Networks(e) 2,694 (212) (21) 2,461
Publishing(c) 1,196 (122) (140) 934
Corporate(d) (1,020) (43) - (1,063)
Intersegment
elimination (22) - - (22)
------------- ------------ ------------ ------------
Total $ 9,372 $ (2,581)$ (626)$ 6,165
============= ============ ============ ============
(a) For the year ended December 31, 2005, Operating Income before
Depreciation and Amortization and Operating Income include a $24
million noncash impairment charge related to goodwill associated
with AOLA, an approximate $5 million gain related to the sale of a
building and a $5 million gain from the resolution of a previously
contingent gain related to the 2004 sale of NSS. For the year
ended December 31, 2004, Operating Income before Depreciation and
Amortization and Operating Income include a $10 million noncash
impairment charge related to a building that was held for sale, a
gain of $13 million related to the sale of AOL Japan and a $7
million gain related to the sale of NSS.
(b) For the year ended December 31, 2005, Operating Income before
Depreciation and Amortization and Operating Income include a $5
million gain related to the sale of a property in California.
(c) For the year ended December 31, 2005, Operating Income before
Depreciation and Amortization and Operating Income include an $8
million gain related to the collection of a loan made in
conjunction with the Company's 2003 sale of Time Life, which was
previously fully reserved due to concerns about recoverability.
For the year ended December 31, 2004, Operating Income before
Depreciation and Amortization and Operating Income include an $8
million gain related to the sale of a building.
(d) For the year ended December 31, 2005, Operating Loss before
Depreciation and Amortization and Operating Income (Loss) include
$3 billion in legal reserves related to securities litigation and
$135 million in net recoveries related to securities litigation
and government investigations. For the year ended December 31,
2004, Operating Income before Depreciation and Amortization and
Operating Income include $510 million in legal reserves related to
the government investigations and $26 million in net expenses
related to securities litigation and government investigations.
(e) For the year ended December 31, 2004, Operating Income before
Depreciation and Amortization and Operating Income include an
approximate $7 million loss related to the sale of the winter
sports teams.
TIME WARNER INC.
RECONCILIATION OF CASH PROVIDED BY OPERATIONS TO FREE CASH FLOW
(millions, unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Cash provided (used) by
operations $ (632) $ 1,230 $ 4,965 $ 6,618
Less discontinued operations:
Net loss - (6) - (121)
Other changes 2 13 10 (2)
-------- -------- -------- --------
Cash provided (used) by
continuing operations (630) 1,237 4,975 6,495
Add payments related to
securities litigation and
government investigations 2,429 213 2,754 236
Less capital expenditures and
product development costs (987) (1,003) (3,246) (3,024)
Less principal payments on
capital leases (24) (43) (118) (191)
-------- -------- -------- --------
Free Cash Flow(a) $ 788 $ 404 $ 4,365 $ 3,516
======== ======== ======== ========
(a) Free Cash Flow is cash provided by operations (as defined by U.S.
generally accepted accounting principles) plus payments related to
securities litigation and government investigations (net of any
insurance recoveries), less cash flow attributable to discontinued
operations, capital expenditures and product development costs,
principal payments on capital leases, and partnership
distributions, if any.
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Description of Business, Recent Transactions and Basis of Presentation Description of Business Time Warner Inc. ("Time Warner" or the "Company") is a leading media and entertainment company, whose businesses include interactive services, cable systems, filmed entertainment, television networks and publishing. Time Warner classifies its business interests into five reportable segments: AOL: consisting principally of interactive services; Cable: consisting principally of interests in cable systems that provide video programming, high-speed data and Digital Phone services; Filmed Entertainment: consisting principally of feature film, television and home video production and distribution; Networks: consisting principally of cable television and broadcast networks; and Publishing: consisting principally of magazine and 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. . Recent Transactions The WB Network JV On January 24, 2006, Warner Bros. Entertainment Inc. ("Warner Bros.") and CBS (Cell Broadcast Service) See cell broadcast. Corp. ("CBS") announced an agreement in principle to form a new fully-distributed national broadcast network. At the same time, Warner Bros. and CBS are preparing to cease the standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. operations of The WB Network and UPN UPN User Principal Name (Microsoft Windows 2000) UPN United Paramount Network UPN Unión del Pueblo Navarro (Navarrese People Union) UPN Umgekehrte Polnische Notation , respectively, at the end of the 2005/2006 television season (September September: see month. 2006). Warner Bros. and CBS will each own 50% of the new network and will have joint and equal control. In addition, Warner Bros. has reached an agreement in principle with Tribune tribune, in ancient Rome, one of various officers. The history of the office of tribune is closely associated with the struggle of the plebs against the patrician class to achieve a more equitable position in the state. From c.508 B.C. Corp. ("Tribune"), currently a subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. 22.25% limited partner in The WB Network, under which Tribune will surrender To give up, return, or yield. The word surrender presupposes the possession or ownership of the thing that is to be returned or given up. It indicates a transfer of title as well as possession, but it does not express or in any way suggest the transaction of a sale its ownership interest in The WB Network and will receive a subordinated participation in the new network. Upon closing of this transaction, the Company will account for this investment under the equity method of accounting. The Company anticipates that prior to the close of this transaction, the Company will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. restructuring charges ranging from $15 million to $20 million related to employee terminations. In addition, the Company may incur costs in terminating certain programming arrangements that will not be contributed to the new network or utilized in another manner. AOL-Google Alliance During December 2005, the Company announced that AOL was expanding its current strategic alliance with Google to enhance its global online advertising partnership and make more of AOL's content available to Google users. Under the alliance, Google and AOL will continue to provide search technology to AOL's network of Internet properties worldwide. Other key aspects of the alliance include: --Creating an AOL Marketplace through white labeling of Google's advertising technology, which enables AOL to sell search advertising directly to advertisers on AOL-owned properties; --Expanding display advertising available for AOL to sell throughout the Google network; --Making AOL content more accessible to Google Web crawlers See crawler and WebCrawler. ; --Collaborating in video search and showcasing AOL's premium video service within Google Video Google Video is a free video sharing and video search engine service from Google that allows anyone to upload video clips to Google's web servers as well as make their own media available free of charge; some videos are also offered for sale through the Google Video Store. ; --Enabling Google Talk Google's instant messaging (IM) service, which provides text messaging and voice calling. It provides a link to the user's Gmail account as well as displays the number of unread messages in the inbox. and AIM instant messaging Exchanging text messages in real time between two or more people logged into a particular instant messaging (IM) service. Instant messaging is more interactive than e-mail because messages are sent immediately, whereas e-mail messages can be queued up in a mail server for seconds or users to communicate with each other, provided certain conditions are met; and --Providing AOL marketing credits for promotion of AOL's content on Google's Internet properties. In addition, Google will invest $1 billion for a 5% equity interest in a limited liability company that will own all of the outstanding equity interests in AOL. The Company expects these transactions with Google to close during the first quarter of 2006. Amounts Related to Securities Litigation In July July: see month. 2005, the Company reached an agreement in principle for the settlement of the securities class action lawsuits class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax included in the matters consolidated under the caption In re: AOL Time Warner Inc. Securities & "ERISA See Employee Retirement Income Security Act. ERISA See Employee Retirement Income Security Act (ERISA). " Litigation described in the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "2004 Form 10-K"). The settlement is reflected in a written agreement between the lead plaintiff and the Company. On September 30, 2005, the court issued an order granting preliminary approval of the settlement and certified See certification. the settlement class. The court has scheduled the final approval hearing for February 22, 2006. At this time, there can be no assurance that the settlement of the securities class action litigation will receive final court approval. In connection with reaching the agreement in principle on the securities class action, the Company established a reserve of $2.4 billion during the second quarter of 2005. Ernst & Young LLP LLP - Lower Layer Protocol also has agreed to a settlement in this litigation matter and will pay $100 million. Pursuant to the settlement, in October October: see month. 2005 Time Warner paid $2.4 billion into a settlement fund (the "MSBI MSBI Microsoft Business Intelligence MSBI Minnesota State Board of Investment Settlement Fund") for the members of the class represented in the action. In addition, the $150 million previously paid by Time Warner into a fund in connection with the settlement of the investigation by the U.S. Department of Justice ("DOJ (Department Of Justice) The legal arm of the U.S. government that represents the public interest of the United States. It is headed by the Attorney General. ") was transferred to the MSBI Settlement Fund, and Time Warner is using its best efforts to have the $300 million it previously paid in connection with the settlement of its Securities and Exchange Commission ("SEC") investigation, or at least a substantial portion thereof, transferred to the MSBI Settlement Fund. In addition to the $2.4 billion reserve established in connection with the agreement in principle regarding the settlement of the MSBI consolidated securities class action, during the second quarter of 2005 the Company established an additional reserve totaling $600 million in connection with the other related securities litigation matters, described in pages 39-42 of the 2004 Form 10-K, that are pending against the Company. This $600 million amount continues to represent the Company's current best estimate of its potential financial exposure in these matters, including the remaining individual shareholder suits, the derivative actions A lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do. A derivative action, more popularly known as a Stockholder's Derivative Suit, is derived from the primary right of the and the actions alleging violations of the Employee Retirement Income Security Act The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001 et seq. (1974), is a federal law that sets minimum standards for most voluntarily established Pension and health plans in private industry to provide protection for individuals enrolled in these plans. ("ERISA"). The Company reached an agreement with the carriers on its directors and officers insurance policies in connection with the securities and derivative action matters described above and in pages 38-42 of the 2004 Form 10-K (other than the actions alleging violations of ERISA described on page 39 of the 2004 Form 10-K). As a result of this agreement, the Company has recorded a recovery of approximately $185 million, which is expected to be collected in the first quarter of 2006 and is reflected as a reduction to "Amounts related to securities litigation and government investigations" in the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. consolidated statement of operations See Income statement. for the year ended December 31, 2005. Update on Status of Government Investigations As previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). by the Company, the SEC and the DOJ had been conducting investigations into the accounting and disclosure practices of the Company. Those investigations focused on advertising transactions, principally involving the Company's America Online segment, the methods used by the America Online segment to report its subscriber numbers and the accounting related to the Company's interest in AOL Europe prior to January 2002. During 2004, the Company established $510 million in legal reserves related to the government investigations, the components of which are discussed in more detail in the following paragraphs. The Company and its subsidiary, AOL, entered into a settlement with the DOJ in December 2004 that provided for a deferred prosecution prosecution n. 1) in criminal law, the government attorney charging and trying the case against a person accused of a crime. 2) a common term for the government's side in a criminal case, as in "the prosecution will present five witnesses" or "the prosecution rests" arrangement for a two-year period. As part of the settlement with the DOJ, in December 2004, the Company paid a penalty of $60 million and established a $150 million fund, which the Company could use to settle related securities litigation. The fund is reflected as restricted cash on the Company's accompanying consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. at December 31, 2004. During October 2005, the $150 million was transferred by the Company into the settlement fund for the members of the class covered by the consolidated securities class action described above under the heading "Amounts Related to Securities Litigation." In addition, on March 21, 2005, the Company announced that the SEC had approved the Company's proposed settlement, which resolved the SEC's investigation of the Company. Under the terms of the settlement with the SEC, the Company agreed, without admitting or denying the SEC's allegations, to be enjoined from future violations of certain provisions of the securities laws and to comply with the cease-and-desist order Cease-and-desist order An order issued after notice and opportunity for hearing, requiring a depository institution, a holding company or a depository institution official to terminate unlawful, unsafe or unsound banking practices. issued by the SEC to AOL in May 2000. The settlement also required the Company to: --Pay a $300 million penalty, which will be used for a Fair Fund, as authorized under the Sarbanes-Oxley Act See SOX. ; --Adjust its historical accounting for Advertising revenues in certain transactions 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. , A.G. that were improperly im·prop·er adj. 1. Not suited to circumstances or needs; unsuitable: improper shoes for a hike; improper medical treatment. 2. or prematurely pre·ma·ture adj. 1. Occurring, growing, or existing before the customary, correct, or assigned time; uncommonly or unexpectedly early: a premature end. 2. recognized, primarily in the second half of 2000, during 2001 and during 2002; as well as adjust its historical accounting for transactions involving three other AOL customers where there were Advertising revenues recognized in the second half of 2000 and during 2001; --Adjust its historical accounting for its investment in and consolidation of AOL Europe; and --Agree to the appointment of an independent examiner, who will either be or hire a certified public accountant Certified Public Accountant (CPA) An accountant who has met certain standards, including experience, age, and licensing, and passed exams in a particular state. . The independent examiner will review whether the Company's historical accounting for transactions with 17 counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. identified by the SEC staff, principally involving online advertising revenues and including three cable programming affiliation affiliation (  fil´ēā´sh agreements with related advertising
elements, was in conformity with GAAP GAAPSee: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , and provide a report to the Company's audit and finance committee of its conclusions, originally within 180 days of being engaged. The transactions that would be reviewed were entered into between June June: see month. 1, 2000 and December 31, 2001, including subsequent amendments thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. , and involved online advertising and related transactions for which revenue was principally recognized before January 1, 2002. The Company paid the $300 million penalty in March 2005; however, it will not be able to deduct de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. the penalty for income tax purposes, be reimbursed or indemnified for such payment through insurance or any other source, or use such payment to setoff setoff (offset) n. a claim by a defendant in a lawsuit that the plaintiff (party filing the original suit) owes the defendant money which should be subtracted from the amount of damages claimed by plaintiff. or reduce any award of compensatory damages A sum of money awarded in a civil action by a court to indemnify a person for the particular loss, detriment, or injury suffered as a result of the unlawful conduct of another. to plaintiffs in related securities litigation pending against the Company. As described above, in connection with the pending settlement of the consolidated securities class action, the Company is using its best efforts to have the $300 million, or a substantial portion thereof, transferred to the settlement fund for the members of the class represented in the action. The historical accounting adjustments were reflected in the restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of the Company's financial results for each of the years ended December 31, 2000 through December 31, 2003, which were included in the Company's 2004 Form 10-K. The independent examiner has begun its review, which as a result of an extension, is expected to be completed in the second quarter of 2006. Depending on the independent examiner's conclusions, a further restatement might be necessary. It is also possible that, so long as there are unresolved Not completed; not finished; not linked together. See resolve. issues associated with the Company's financial statements, the effectiveness of any registration statement of the Company or its affiliates may be delayed. Common Stock Dividends On May 20, 2005, the Company announced that it would begin paying a regular quarterly cash dividend of $0.05 per share on its common stock beginning in the third quarter 2005. Under this dividend program, on September 15, 2005 and December 15, 2005, the Company paid cash dividends of $0.05 per share on its common stock, to shareholders of record on August 31, 2005 and November November: see month. 30, 2005, respectively. The total amount of dividends paid during 2005 was $466 million. Adelphia Acquisition Agreement On April 20, 2005, a subsidiary of the Company, Time Warner NY Cable LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control ("TW NY"), 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. Corporation ("Comcast") each entered into separate definitive agreements with Adelphia Communications Corporation ("Adelphia") to, collectively, acquire substantially all the assets of Adelphia for a total of $12.7 billion in cash (of which TW NY will pay $9.2 billion and Comcast will pay the remaining $3.5 billion) and 16% of the common stock of 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."). At the same time that Comcast and TW NY entered into the Adelphia agreements, Comcast, TWC Inc. and/or their respective affiliates entered into agreements providing for the redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of Comcast's interests in TWC Inc. and 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 ") (the "TWC Inc. Redemption Agreement" and the "TWE Redemption Agreement," respectively, and, collectively, the "TWC Inc. and TWE Redemption Agreements"). Specifically, Comcast's 17.9% interest in TWC Inc. will be redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. in exchange for stock of a subsidiary of TWC Inc. holding cable systems serving approximately 587,000 subscribers (as of December 31, 2004), as well as approximately $1.9 billion in cash. In addition, Comcast's 4.7% interest in TWE will be redeemed in exchange for interests in a subsidiary of TWE holding cable systems serving approximately 168,000 subscribers (as of December 31, 2004), as well as approximately $133 million in cash. TWC Inc., Comcast and their respective subsidiaries will also swap certain cable systems to enhance their respective geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. clusters of subscribers ("Cable Swaps"). After giving effect to the transactions, TWC Inc. will gain systems passing approximately 7.5 million homes (as of December 31, 2004), with approximately 3.5 million basic subscribers. TWC Inc. will then manage a total of approximately 14.4 million basic subscribers. Time Warner will own 84% of TWC Inc.'s common stock (including 83% of the outstanding TWC Inc. Class A Common Stock, which will become publicly traded at the time of closing, and all outstanding shares of TWC Inc. Class B Common Stock) and own a $2.9 billion indirect economic interest in TW NY, a subsidiary of TWC Inc. These transactions are subject to customary regulatory review and approvals, including Hart-Scott-Rodino antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. approval, Federal Communications Commission Federal Communications Commission (FCC), independent executive agency of the U.S. government established in 1934 to regulate interstate and foreign communications in the public interest. ("FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. ") and local franchise approvals, as well as, in the case of the Adelphia acquisition, the Adelphia bankruptcy process, which involves approvals by the bankruptcy court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. having jurisdiction over Adelphia's Chapter 11 case and Adelphia's creditors. Closing of the Adelphia acquisition is expected during the first half of 2006. The purchase of Adelphia's assets is not dependent on the closing of the Cable Swaps or the transactions contemplated by the TWC Inc. and TWE Redemption Agreements. Furthermore, if Comcast fails to obtain certain necessary governmental authorizations, TW NY has agreed to acquire the cable operations of Adelphia that would have been acquired by Comcast, with the purchase price payable in cash or TWC Inc. stock at the Company's discretion. Urban Cable Works of Philadelphia Philadelphia, ancient cities Philadelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. , L.P. On November 22, 2005, TWC Inc. purchased the remaining 60% interest in Urban Cable Works of Philadelphia, L.P. ("Urban Cable"), an operator of cable systems in Philadelphia, Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York with approximately 47,000 basic subscribers. The purchase price consisted of $54 million in cash and the assumption of $44 million of Urban Cable's third-party debt. Prior to TWC Inc.'s acquisition of the remaining interest, Urban Cable was an unconsolidated joint venture of TWC Inc., which was 40% owned by TWC Inc. and 60% owned by an investment group led by Inner City Broadcasting ("Inner City"). Under a management agreement, TWC Inc. was responsible for the day-to-day day-to-day adj. 1. Occurring on a routine or daily basis: the day-to-day movements of the stock market. 2. management of Urban Cable. During 2004, TWC Inc. made cash payments of $34 million to Inner City to settle certain disputes regarding the joint venture. In conjunction with the proposed Adelphia acquisition described above, Urban Cable will be transferred to Comcast as part of the Cable Swaps. For additional details, please refer to the subsection subsection Noun any of the smaller parts into which a section may be divided Noun 1. subsection - a section of a section; a part of a part; i.e. titled "Adelphia Acquisition Agreement" above. From the time it was consolidated through December 31, 2005, Urban Cable contributed Subscription revenues and Operating Income of $7 million and $1 million, respectively. Basis of Presentation Stock-Based Compensation In December 2004, the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). ("FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). ") issued FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting of Financial Accounting Standards ("Statement") No. 123 (Revised), "Share-Based Payment" ("FAS 123R"). FAS 123R requires all companies to measure compensation costs for all share-based payments (including employee stock options) at fair value and recognize such costs in the statement of operations. As a result, the application of the provisions of FAS 123R will have a significant impact on Operating Income before Depreciation and Amortization, Operating Income, Net Income and Earnings per Share. In the accompanying financial statements, the Company accounts for share-based compensation using the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. method set forth in Accounting Principles Board The Accounting Principles Board (APB) is the former authoritative body of the American Institute of Certified Public Accountants (AICPA). It was created by the American Institute of Certified Public Accountants in 1959 and issued pronouncements on accounting principles until 1973, Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB APB See Accounting Principles Board (APB). 25"). The Company will adopt FAS 123R beginning January 1, 2006 and plans to restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state previously reported amounts as allowed by FAS 123R. In accordance with APB 25 and related interpretations, compensation expense for stock options is recognized in income based on the excess, if any, of the quoted market price of the stock at the grant date of the award or other measurement date over the amount an employee must pay to acquire the stock. The compensation costs related to stock options recognized by the Company pursuant to APB 25 were minimal. If a company measures share-based compensation using APB 25, it must also disclose what the impact would have been if it had measured share-based compensation using the fair value of the equity award on the date it is granted as provided in FAS 123, the predecessor predecessor - parent of FAS 123R. If compensation costs for the Company's stock option plans had been determined based on the fair value method set forth in FAS 123, the Company would have recorded $319 million and $544 million of additional compensation expense 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 on a pre-tax basis for the years ended December 31, 2005 and 2004, respectively. Reclassifications Certain reclassifications have been made to the prior year's financial 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 December 31, 2005 presentation. Note 2: Intersegment Transactions In the normal course of business, the Time Warner segments enter into transactions with one another. The most common types of intersegment transactions include: --The Filmed Entertainment segment generating Content revenues 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 Cable segment recognizing Subscription revenues by offering the AOL service to its subscribers; --The AOL, Cable, Networks and Publishing segments generating Advertising revenues by cross-promoting the products and services of all Time Warner segments; and --The AOL segment generating Other revenues by providing the Cable segment's customers access to the AOL Transit Data Network for high-speed access to the Internet. These intersegment transactions are recorded by each segment at estimated fair value as if the transactions were with third parties and, therefore, impact segment performance. While intersegment 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. Additionally, transactions between divisions within the same reporting segment (e.g., a transaction between HBO and Turner Broadcasting System Turner Broadcasting System, Inc. (often abbreviated TBS Networks or TBS, inc.) is the company managing the collection of cable networks and properties started by Robert Edward "Ted" Turner from the mid-1970s to the late-1990s. , Inc. within the Networks segment) are eliminated in arriving at segment performance and, therefore, do not themselves impact segment results. Revenues recognized by Time Warner's segments on intersegment transactions are as follows:
Three Months Ended Year Ended
December 31, December 31,
----------------- -----------------
2005 2004 2005 2004
------- ------- ------- -------
(millions)
Intersegment Revenues(a)
AOL $ 10 $ 14 $ 28 $ 59
Cable 8 17 40 54
Filmed Entertainment 210 264 749 757
Networks 155 159 595 602
Publishing 32 27 98 87
------- ------- ------- -------
Total intersegment revenues $ 415 $ 481 $ 1,510 $ 1,559
======= ======= ======= =======
(a) Intersegment revenues include intercompany Advertising revenues of
$55 million and $57 million for the three months ended December
31, 2005 and 2004, respectively, and $176 million and $162 million
for the year ended December 31, 2005 and 2004, respectively.
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