Time Warner Inc. Reports Second Quarter 2007 Results.Board of Directors Authorizes New $5 Billion Stock Repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. Program 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 second quarter ended June 30, 2007. In addition, Time Warner's Board of Directors has 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 new $5 billion stock repurchase program. In making the announcement, 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 pleased with Time Warner's solid results for the quarter. Our performance over the first half of 2007 keeps us firmly on track to achieve all of the Company's full-year financial objectives. Driving this quarter's profits were gains at our Cable, Publishing and Networks segments. Most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , our earnings per share delivered double-digit growth, benefiting from our recently completed stock repurchase program." Mr. Parsons added: "Building on this success, I'm pleased to announce that our Board of Directors has approved a new $5 billion stock repurchase program to complement our recently announced increase in our regular quarterly cash dividend. Supported by our strong balance sheet, robust generation of Free Cash Flow and excellent growth prospects, this new program and last week's increase in our regular quarterly cash dividend further advance our commitment to return value directly to our shareholders. At the same time, we will continue to invest in organic growth as well as in attractive strategic opportunities." Company Results In the quarter, Revenues rose 6% over the same period in 2006 to $11.0 billion, led by growth at the Cable segment. 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 20% to $3.1 billion, reflecting double-digit increases at the Cable, Publishing and Networks segments. This growth was offset partly by declines at the Filmed Entertainment and 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. segments. Operating Income was up 12% to $1.9 billion. For the first six months, Cash Provided by Operations amounted to $3.1 billion, and Free Cash Flow totaled $2.0 billion (representing a 33% conversion rate of Adjusted Operating Income before Depreciation and Amortization). As of June 30, 2007, Net Debt was $35.0 billion, up $1.6 billion from $33.4 billion at the end of 2006, due primarily to the Company's prior stock repurchase program. 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 $0.25 for the three months ended June 30, 2007, compared to $0.20 in last year's second 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 the current and prior year quarters' results by $0.03 and $0.01, respectively. Stock Repurchase Programs The Board of Directors has authorized a new $5 billion stock repurchase program. Purchases under 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 factors including price as well as business and market conditions. In completing its previous stock repurchase program on schedule at the end of the second quarter, the Company repurchased approximately 1.1 billion shares of common stock, or about 23% of the total outstanding shares at the program's inception, for approximately $20 billion. On May 16, 2007, Time Warner and Liberty Media Corporation ("Liberty") completed a transaction in which Liberty exchanged 68.5 million shares of Time Warner common stock (including 4 million shares of common stock that are expected to be delivered upon the resolution of a working capital adjustment) for a subsidiary that owned assets including the Atlanta Braves The Atlanta Braves are a professional baseball team based in Atlanta, Georgia. The Braves are a member of the Eastern Division of Major League Baseball's National League. From to the present, the Braves have played in Turner Field. baseball franchise, Time Inc.'s Leisure Arts, Inc. and $960 million of cash. Performance of Segments The schedules below reflect Time Warner's performance for the three and six months ended June 30, by line of business (unaudited, in millions): [TABLE OMITTED] Presented below is a discussion of Time Warner's segments for the second quarter of 2007. Unless otherwise noted, the dollar amounts in parentheses See parenthesis. parentheses - See left parenthesis, right parenthesis. represent year-over-year changes. AOL Revenues declined 38% ($774 million) to $1.3 billion, resulting from a 55% decrease ($855 million) in Subscription revenues, offset partially by a 16% increase ($73 million) in Advertising revenues. The decline in Subscription revenues was due to a decrease in domestic AOL brand subscribers, which reflects in part AOL's previously announced strategy to offer its e-mail, certain software and other products free of charge to broadband users in the U.S., as well as the sales of AOL's Internet access See how to access the Internet. businesses in the U.K., France and Germany (approximately $400 million). Advertising revenues benefited from growth in display and paid-search advertising on the AOL Network as well as in sales of advertising on Partner Sites. Adjusted Operating Income before Depreciation and Amortization declined 2% ($9 million) to $485 million, due primarily to lower Subscription revenues, offset partly by reductions in network ($248 million) and marketing ($226 million) expenses and growth in Advertising revenues. Operating Income increased 9% ($31 million) to $360 million, due primarily to lower depreciation ($22 million) and amortization expenses ($19 million), offset in part by lower Adjusted Operating Income before Depreciation and Amortization. Highlights During the second quarter, AOL had 114 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 52 billion domestic 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 Media Metrix, which translates into 152 average monthly page views per unique visitor. As of June 30, 2007, the AOL service had 10.9 million U.S. access subscribers, a decline of 1.1 million from the prior quarter and 6.8 million from the year-ago quarter, reflecting subscriber losses due in part to AOL's strategy to prioritize pri·or·i·tize v. pri·or·i·tized, pri·or·i·tiz·ing, pri·or·i·tiz·es Usage Problem v.tr. To arrange or deal with in order of importance. v.intr. its advertising business. CABLE (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. ) Basis of Presentation On July 31, 2006, a subsidiary of Time Warner Cable, Time Warner NY Cable LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control ("TW NY"), acquired certain cable systems from Adelphia Communications Corporation, Comcast Corporation's ("Comcast") interests in Time Warner Cable and Time Warner Entertainment Company, L.P. were 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. , and TW NY and Comcast also exchanged certain cable systems. Collectively, these acquisitions and dispositions are referred to as the "Adelphia/Comcast Transactions." On January 1, 2007, Texas and Kansas City Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). Cable Partners, L.P. ("TKCCP"), an unconsolidated joint venture between Time Warner Cable and Comcast, distributed its assets to its partners. Time Warner Cable received the systems in Kansas City, south and west Texas and New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). (the "Kansas City Pool"), which served approximately 788,000 basic video subscribers at December 31, 2006, and began consolidating the financial results of the Kansas City Pool on January 1, 2007. For the presentation of subscriber information, the systems that Time Warner Cable acquired in the Adelphia/Comcast Transactions, which served approximately 3.8 million basic video subscribers at June 30, 2007, are referred to as the "Acquired Systems." Those systems that Time Warner Cable owned both before and after the Adelphia/Comcast Transactions as well as the Kansas City Pool, which together served approximately 9.6 million basic video subscribers at June 30, 2007, are referred to as the "Legacy Systems." For the presentation of financial information, however, "Legacy Systems" refers only to those systems that Time Warner Cable owned both before and after the Adelphia/Comcast Transactions and does not include the Kansas City Pool. The "Acquired Systems" has the same definition as above. Cable Results Revenues rose 59% ($1.5 billion) to $4.0 billion, due primarily to the addition of the Acquired Systems ($1.0 billion), the consolidation of the Kansas City Pool ($219 million) and 10% growth in the Legacy Systems. Subscription revenues increased 59% ($1.4 billion) to $3.8 billion, led by 59% growth in video revenues ($954 million), a 54% increase in high-speed data revenues ($323 million) and a 75% rise in voice revenues ($122 million). This growth was driven by the addition of the Acquired Systems and the consolidation of the Kansas City Pool, as well as video price increases and year-over-year subscriber growth in the Legacy Systems. Advertising revenues increased 70% ($93 million) to $226 million, due primarily to the addition of the Acquired Systems ($76 million). Operating Income before Depreciation and Amortization grew 52% ($494 million) to $1.4 billion, benefiting from revenue growth, offset partially by increases in 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. , primarily video programming and employee expenses. Total video programming expenses increased 66% ($351 million) to $882 million. Driving the increase in video programming expenses was the addition of the Acquired Systems ($256 million) and the consolidation of the Kansas City Pool ($51 million). The current quarter and prior year period also included merger-related and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $6 million and $11 million, respectively. Operating Income increased 31% ($167 million) to $711 million, reflecting primarily the increase in Operating Income before Depreciation and Amortization, offset partially by higher depreciation ($281 million) and amortization ($46 million) expenses due mainly to the addition of the Acquired Systems. Highlights As of June 30, 2007, Time Warner Cable served approximately 13.4 million basic video subscribers. During the quarter, Time Warner Cable had a net increase of 546,000 revenue generating units ("RGUs"). Total RGUs were 31.0 million at June 30, 2007. At June 30, 2007, nearly 6.7 million customers (45% of Time Warner Cable's 14.7 million customer relationships) subscribed to two or more of Time Warner Cable's primary services (video, high-speed data and voice), reflecting net additions of 184,000 during the quarter. Triple play subscribers totaled 1.9 million (13% of customer relationships), reflecting net additions of 186,000 during the quarter. Basic video subscribers decreased a net 57,000 during the quarter, with net losses of 19,000 basic video subscribers in the Legacy Systems and 38,000 in the Acquired Systems. Digital video subscribers totaled 7.7 million at the end of the quarter, representing 58% penetration of basic video customers. Digital video net additions reached 184,000 during the quarter. The Legacy Systems grew by 117,000 net additions during the second quarter, and the Acquired Systems grew by 67,000 net additions. At June 30, 2007, Time Warner Cable had 7.2 million residential high-speed data subscribers, reflecting 28% penetration of service-ready homes passed. Residential high-speed data net additions totaled 188,000 during the quarter. The Legacy Systems contributed net additions of 128,000 residential high-speed data subscribers, while the Acquired Systems contributed net additions of 60,000. Digital Phone subscribers at the end of the quarter were 2.3 million, representing 12% penetration of service-ready homes passed. Digital Phone net additions were 241,000 during the quarter. The Legacy Systems grew by 178,000 net additions during the quarter, and the Acquired Systems grew by 63,000. 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) Revenues decreased 5% ($110 million) to $2.3 billion, due primarily to lower revenues from television product, as the prior year quarter included the second-cycle syndication See syndication format. availability of Friends and the off-network availability of the first three seasons of Without a Trace. Also contributing to the decline were difficult prior year comparisons in worldwide home video, which included revenue from Harry Potter and the Goblet of Fire in the prior year quarter, as well as reduced television licensing on made for theatrical product. These declines were offset partly by higher theatrical revenue, primarily from Warner Bros.' Ocean's 13 and 300. Operating Income before Depreciation and Amortization declined 24% ($55 million) to $174 million, reflecting lower contributions from television product as well as declines in theatrical product due primarily to higher print and advertising expenses. Operating Income decreased 43% ($60 million) to $81 million, due primarily to the decline in Operating Income before Depreciation and Amortization. Highlights Warner Home Video Warner Home Video is the home video unit of Warner Bros. Home Entertainment Group, a division of Warner Bros. Entertainment, Inc. It was founded in 1978 as WCI Home Video (for Warner Communications, Inc.). It was re-named Warner Home Video in 1980. ranked #1 in U.S. home video sales for the first six months of 2007, garnering an industry-leading 18.4% share. The quarter's notable home video releases included Warner Bros.' Music and Lyrics lyrics npl [of song] → paroles fpl lyrics lyric npl [of song] → Text m and Letters from Iwo Jima Letters from Iwo Jima (Japanese: 硫黄島からの手紙, Iwo jima kara no tegami) is a 2006 Academy Award and Golden Globe-winning critically-acclaimed[1][2][3] , as well as Picturehouse's Pan's Labyrinth labyrinth (lăb`ərĭnth), intricate building of chambers and passages, often constructed so as to perplex and confuse a person inside. . Through July 29, 2007, Warner Bros.' Harry Potter and the Order of the Phoenix has generated worldwide box office receipts of approximately $696 million. Last month, Warner Bros. Entertainment received 20 nominations for the 59th Primetime Emmy Awards The Primetime Emmy Awards are awards presented by the Academy of Television Arts & Sciences in recognition of excellence in American primetime television programming. First awarded in 1949, they were originally referred to as just the "Emmy Awards" until the first Daytime Emmy , led by seven nominations for Two and a Half Men Two and a Half Men is a North American television sitcom centered around a freewheeling bachelor, Charlie, whose carefree lifestyle is interrupted when his newly separated brother, Alan, moves in, along with his son Jake. and five for Studio 60 on the Sunset Strip Studio 60 on the Sunset Strip is an American television Comedy-drama series created and written by Aaron Sorkin. It takes place behind the scenes of a fictional live sketch comedy show (also called Studio 60 on the Sunset Strip . NETWORKS (Turner Broadcasting & HBO Hyperbaric oxygen therapy (HBO) A form of oxygen therapy in which the patient breathes oxygen in a pressurized chamber. Mentioned in: Ozone Therapy ) Revenues declined 1% ($24 million) to $2.6 billion, reflecting an 11% decrease ($98 million) in Advertising revenues, offset partly by a 5% increase ($71 million) in Subscription revenues. The decline in Advertising revenues was due to the cessation cessation Vox populi The stopping of a thing. See Smoking cessation. of The WB Network's operations in September 2006, offset partially by a 6% increase at Turner. The increase in Subscription revenues resulted primarily from higher rates and, to a lesser extent, increased subscribers at Turner. Adjusted Operating Income before Depreciation and Amortization climbed 10% ($65 million) to $746 million, driven by higher Subscription revenues as well as the absence of net losses incurred during the prior year quarter at The WB Network, which included $81 million in shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down costs before consideration of the impact of intersegment eliminations (see footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." (e) on page 3). The current year quarter also included $16 million of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when charges at HBO. Operating Income increased 4% ($23 million) to $634 million, due primarily to the increase in Adjusted Operating Income before Depreciation and Amortization, offset in part by a $34 million noncash charge Noncash charge A cost, such as depreciation, depletion, and amortization, that does not involve any cash outflow. That is, this is treated as an accounting expense -- not a real expense that demands cash. related to the 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. of the Court TV tradename as a result of rebranding the Court TV network name to truTV, effective January 1, 2008. Highlights During the quarter, among advertising-supported cable networks, TNT TNT: see trinitrotoluene. TNT in full trinitrotoluene Pale yellow, solid organic compound made by adding nitrate (−NO2) groups to toluene. ranked #1 in total day delivery of its key demographics The attributes of people in a particular geographic area. Used for marketing purposes, population, ethnic origins, religion, spoken language, income and age range are examples of demographic data. , Adults 18-49 and Adults 25-54, as well as #2 in prime-time delivery of Adults 18-34, Adults 18-49, Adults 25-54 and Total Viewers. TNT's third-season premiere of The Closer set an advertising-supported cable record as the most-watched series telecast ever among Total Viewers and Households. It also ranks as advertising-supported cable's top telecast of the year in the same categories, as well as among Adults 25-54. In addition, 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) ranked #3 in prime-time delivery of Adults 18-34, Adults 18-49, Adults 25-54 and Total Viewers. 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. also ranked #1 for the quarter in total day delivery of Adults 18-34, setting a new advertising-supported cable record in that demographic. HBO received 86 nominations for the 59th Primetime Emmy Awards, the most of any network for the seventh year in a row, with the 17 nominations for Bury Bury (bĕ`rē), city (1991 pop. 60,785) and metropolitan district, NE England, located in the Manchester metropolitan area on the Irwell River and linked by canal with Bolton and Manchester. My Heart at Wounded Knee Wounded Knee, creek, rising in SW S.Dak. and flowing NW to the White River; site of the last major battle of the Indian wars. After the death of Sitting Bull, a band of Sioux, led by Big Foot, fled into the badlands, where they were captured by the 7th Cavalry on Dec. leading all other nominees, and The Sopranos' 15 nominations topping all other series. In addition, TNT garnered 11 nominations, including an Outstanding Lead Actress in a Drama Series nomination for The Closer's Kyra Sedgwick Kyra Sedgwick (born August 19, 1965)[1] is an Emmy-nominated and Golden Globe Award-winning American actress. In 2007, Sedgwick won Best Actress for lead role in a dramatic TV series at the Golden Globes for her role in The Closer. . In the Outstanding Animated Program categories, Cartoon Network For Cartoon Network outside of the United States, see . Cartoon Network is a cable television network created by Turner Broadcasting which primarily shows animated programming. received three nominations and Adult Swim collected one. Turner Classic Movies earned an Outstanding Nonfiction non·fic·tion n. 1. Prose works other than fiction: I've read her novels but not her nonfiction. 2. The category of literature consisting of works of this kind. Special nomination for the documentary Brando, which is being released on video by Warner Home Video. PUBLISHING (Time Inc.) Revenues of $1.3 billion were essentially flat compared to the prior year quarter, reflecting higher Advertising revenues ($6 million), offset by lower Other revenues ($6 million). Advertising revenues benefited mainly from higher digital revenues ($19 million), led by People.com and CNNMoney.com, offset partially by declines in print magazine revenues. The decrease in Other revenues was due primarily to a decline at Southern Living at Home. Included in Revenues was a $21 million favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact reflecting changes in foreign currency exchange rates. Operating Income before Depreciation and Amortization increased 12% ($33 million) to $302 million, due primarily to lower restructuring charges ($15 million) and overall growth in non-magazine businesses, particularly 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 domestic magazines. Operating Income rose 13% ($29 million) to $256 million, reflecting an increase in Operating Income before Depreciation and Amortization. Highlights Based on Publishers Information Bureau (PIB See NIST binary. ) data, Time Inc.'s 2007 industry-leading share of overall domestic advertising through June 30, exclusive of newspaper supplements, was 18.7%. CONSOLIDATED REPORTED NET INCOME AND PER SHARE RESULTS For the three months ended June 30, 2007, the Company reported Net Income of $1.1 billion, or $0.28 per diluted common share. This compares to Net Income in the prior year quarter of $1.0 billion, or $0.24 per diluted common share. For the three months ended June 30, 2007, the Company reported Income before Discontinued Operations and Cumulative Effect of Accounting Change of $945 million, or $0.25 per diluted common share. This compares to Income before Discontinued Operations and Cumulative Effect of Accounting Change in the prior year quarter of $832 million, or $0.20 per diluted common share. Certain pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern items in the current year quarter affected comparability, including a gain of approximately $100 million from the sale of Time Inc.'s 50% ownership of Bookspan and $11 million in other net investment gains, offset partly by a $34 million noncash charge related to the impairment of the Court TV tradename as a result of rebranding the Court TV network name. The current year quarter also included $77 million of tax benefits related primarily to the realization of tax attribute carryforwards and the change in certain state tax laws. Certain pretax items in the prior year quarter similarly affected comparability, including $32 million in net expenses related to 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. and government investigations, offset in part by $20 million of net investment gains. The prior year quarter also included $9 million of tax benefits related primarily to the realization of tax attribute carryforwards. In aggregate, these items had the net effect of increasing the current year quarter's Income before Discontinued Operations and Cumulative Effect of Accounting Change by $118 million (net of taxes), or $0.03 per diluted common share, and increasing the prior year quarter by $3 million (net of taxes), or $0.01 per diluted common share. Excluding such items, Income before Discontinued Operations and Cumulative Effect of Accounting Change declined, reflecting higher depreciation, amortization and interest expenses related to the Adelphia and Comcast transactions, offset in part by growth in Adjusted Operating Income before Depreciation and Amortization. Excluding such items, Diluted Income per Common Share before Discontinued Operations and Cumulative Effect of Accounting Change increased in the current year quarter compared to the prior year quarter, driven by a decrease in average diluted common shares as a result of common stock repurchases made under the stock repurchase program. Use of Operating Income (Loss) before Depreciation and Amortization, Adjusted Operating Income (Loss) before Depreciation and Amortization and Free Cash Flow The Company utilizes Operating Income (Loss) 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 (Loss) 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 (Loss) before Depreciation and Amortization). Both Operating Income (Loss) before Depreciation and Amortization and Adjusted Operating Income (Loss) before Depreciation and Amortization are considered important indicators of the operational strength of the Company's businesses. Operating Income (Loss) 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 tangible and intangible assets used in generating revenues in the Company's businesses. Moreover, Adjusted Operating Income (Loss) 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) and excess tax benefits from the exercise of stock options, less cash flow attributable 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 its businesses and this measure is considered an important indicator 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 (Loss) before Depreciation and Amortization, Adjusted Operating Income (Loss) before Depreciation and Amortization and Free Cash Flow should be considered in addition to, not as a substitute for, the Company's Operating Income (Loss), 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 Time Warner's Business Outlook Release and Conference Call Time Warner Inc. issued a separate release today regarding its 2007 full-year business outlook. The Company's conference call can be heard live at 10:30 am ET on Wednesday, August 1, 2007. To listen to the call visit www.timewarner.com/investors or AOL Keyword: IR. Information on Time Warner Cable's Press Releases and Conference Call Time Warner Cable Inc. issued separate releases today regarding its second-quarter 2007 results as well as its 2007 full-year business outlook. Time Warner Cable's conference call can be heard live at 8:30 am ET on Wednesday, August 1, 2007. To listen to the call visit www.timewarnercable.com/investors or AOL Keyword: 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 IR. Caution Concerning Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This document includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on management's current expectations or beliefs, and are subject to uncertainty and changes in circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological, strategic and/or regulatory 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 Reports 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] (a) For the three months ended June 30, 2007, Operating Income before Depreciation and Amortization includes a net $1 million reduction to the gains on the sales of AOL's German and U.K. access businesses. (b) For the three months ended June 30, 2007, Operating Income before Depreciation and Amortization includes a $34 million noncash charge related to the impairment of the Court TV tradename as a result of rebranding the Court TV network name to truTV, effective January 1, 2008. (c) For the three months ended June 30, 2007, Operating Income before Depreciation and Amortization includes $1 million in legal reserves related to securities litigation and $3 million in net expenses related to securities litigation and government investigations. For the three months ended June 30, 2006, Operating Income before Depreciation and Amortization includes $32 million in net expenses related to securities litigation and government investigations. [TABLE OMITTED] [TABLE OMITTED] (a) For the six months ended June 30, 2007, Operating Income before Depreciation and Amortization includes a gain of approximately $670 million on the sale of AOL's German access business, a net $1 million reduction to the gains on the sales of AOL's German and U.K. access businesses, and a $1 million noncash asset impairment charge. For the six months ended June 30, 2006, Operating Income before Depreciation and Amortization includes a $2 million gain related to the 2004 sale of Netscape Security Solutions ("NSS (Novell Storage Services) A 64-bit file system introduced with NetWare 5 that can support terabyte-sized files. NSS files and standard NetWare files can be used in the same server. See NetWare 5. 1. (networking) NSS - Nodal Switching System. "). (b) For the six months ended June 30, 2007, Operating Income before Depreciation and Amortization includes a $34 million noncash charge related to the impairment of the Court TV tradename as a result of rebranding the Court TV network name to truTV, effective January 1, 2008. (c) For the six months ended June 30, 2007, Operating Income before Depreciation and Amortization includes $153 million in legal reserves related to securities litigation and $14 million in net expenses related to securities litigation and government investigations. For the six months ended June 30, 2006, Operating Income before Depreciation and Amortization includes a $20 million gain on the sale of two aircraft, $50 million in legal reserves related to securities litigation and $11 million in net expenses related to securities litigation and government investigations. [TABLE OMITTED] [TABLE OMITTED] (a) For the three months ended June 30, 2007, Operating Income before Depreciation and Amortization and Operating Income include a net $1 million reduction to the gains on the sales of AOL's German and U.K. access businesses. (b) For the three months ended June 30, 2007, Operating Income before Depreciation and Amortization and Operating Income include a $34 million noncash charge related to the impairment of the Court TV tradename as a result of rebranding the Court TV network name to truTV, effective January 1, 2008. (c) For the three months ended June 30, 2007, Operating Income before Depreciation and Amortization and Operating Income include $1 million in legal reserves related to securities litigation and $3 million in net expenses related to securities litigation and government investigations. For the three months ended June 30, 2006, Operating Income before Depreciation and Amortization and Operating Income include $32 million in net expenses related to securities litigation and government investigations. [TABLE OMITTED] [TABLE OMITTED] (a) For the six months ended June 30, 2007, Operating Income before Depreciation and Amortization and Operating Income include a gain of approximately $670 million on the sale of AOL's German access business, a net $1 million reduction to the gains on the sales of AOL's German and U.K. access businesses, and a $1 million noncash asset impairment charge. For the six months ended June 30, 2006, Operating Income before Depreciation and Amortization and Operating Income include a $2 million gain related to the 2004 sale of NSS. (b) For the six months ended June 30, 2007, Operating Income before Depreciation and Amortization and Operating Income include a $34 million noncash charge related to the impairment of the Court TV tradename as a result of rebranding the Court TV network name to truTV, effective January 1, 2008. (c) For the six months ended June 30, 2007, Operating Income before Depreciation and Amortization and Operating Income include $153 million in legal reserves related to securities litigation and $14 million in net expenses related to securities litigation and government investigations. For the six months ended June 30, 2006, Operating Income before Depreciation and Amortization and Operating Income include a $20 million gain on the sale of two aircraft, $50 million in legal reserves related to securities litigation and $11 million in net expenses related to securities litigation and government investigations. [TABLE OMITTED] TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge 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, high-speed data and voice services; Filmed Entertainment: consisting principally of feature film, television and home video production and distribution; Networks: consisting principally of cable television networks; and Publishing: consisting principally of magazine publishing. Changes in Basis of Presentation The 2006 financial information has been recast re·cast tr.v. re·cast, re·cast·ing, re·casts 1. To mold again: recast a bell. 2. so that the basis of presentation is consistent with that of the 2007 financial information. Specifically, the Company has reflected as discontinued operations for all periods presented the financial condition and results of operations of certain businesses sold during the first six months of 2007, which include the Parenting Group, most of the Time4 Media magazine titles, The Progressive Farmer magazine, Leisure Arts, Inc. ("Leisure Arts") and the Atlanta Braves baseball franchise (the "Braves"), as well as certain businesses the Company entered into agreements to sell during the first six months of 2007, which include Tegic Communications, Inc. and Wildseed LLC ("Wildseed"). Also included in discontinued operations for the three and six months ended June 30, 2006 are the operations of the systems transferred to Comcast in connection with the Adelphia/Comcast transactions, the Turner South network and Time Warner Book Group ("TWBG TWBG That Would Be Great "). The financial data for the discontinued operations for the three and six months ended June 30, 2007 and 2006 is as follows (millions, except per share amounts): [TABLE OMITTED] Included in discontinued operations for the three and six months ended June 30, 2007 was a pretax gain of approximately $72 million and a related tax benefit of approximately $82 million on the sale of the Braves. In addition, discontinued operations for the six months ended June 30, 2007 included a pretax gain of approximately $54 million and a related tax benefit of approximately $2 million on the sale of the Parenting Group and most of the Time4 Media magazine titles, an impairment of approximately $18 million on AOL's long-lived assets associated with Wildseed and an impairment of approximately $13 million on the Company's investment in Leisure Arts. For the three months ended June 30, 2007, the tax benefit on the pretax gains resulted primarily from the reversal of certain deferred tax liabilities in connection with the completion of a transaction in which Liberty Media Corporation ("Liberty") exchanged 68.5 million shares of Time Warner common stock for the stock of a subsidiary of Time Warner that owned assets including the Braves and Leisure Arts (at a fair value of $473 million) and $960 million of cash (collectively, the "Liberty Transaction"). The Liberty Transaction was designed to qualify as a tax-free split-off under Section 355 of the Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. of 1986, as amended, and, as a result, the historical deferred tax liabilities associated with the Braves were no longer required. For the six months ended June 30, 2007, the tax benefit on the pretax gains resulted primarily from the reversal of the deferred tax liabilities in connection with the Liberty Transaction and the recognition of deferred tax assets associated with the sale of the magazine titles in the first quarter of 2007. In addition, for the three and six months ended June 30, 2007, the Company incurred an additional $17 million accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. related to changes in estimates of 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. indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from liabilities. For the six months ended June 30, 2007, payments of $26 million were made related to Warner Music Group indemnification liabilities previously established and are disclosed on the Company's consolidated statement of cash flows as "Investment activities of discontinued operations." These indemnification liabilities were 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. for in prior years. Included in the results for the three and six months ended June 30, 2006, was a pretax gain of approximately $129 million and a tax benefit of approximately $21 million related to the sale of Turner South. In addition, the results for the six months ended June 30, 2006, included a pretax gain of approximately $194 million and a related tax benefit of approximately $28 million on the sale of TWBG. For the three and six months ended June 30, 2006, the tax benefit on the sales of Turner South and TWBG resulted primarily from the release of a valuation allowance associated with tax attribute carryforwards offsetting the gains on these transactions. |
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