Time Warner Inc. Reports Third Quarter 2007 Results.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 third quarter ended September 30, 2007.
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 delighted to report that Time Warner delivered solid earnings growth in the quarter. This performance keeps us squarely square·ly
1. Mathematics At right angles: sawed the beam squarely.
2. In a square shape.
3. on track to meet all of our full-year financial objectives. The Company's profit growth reflected double-digit increases at our Cable, Filmed Entertainment and Publishing businesses. We look forward to a strong finish to this year, and we're confident in our growth prospects for 2008."
In the quarter, Revenues rose 9% over the same period in 2006 to $11.7 billion, led by growth at the Cable, Filmed Entertainment and Networks segments.
Adjusted Operating Income Operating Income
The profit realized from a business' own operations.
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 15% to $3.2 billion, reflecting double-digit increases at the Cable, Filmed Entertainment and Publishing segments, as well as a gain at the Networks segment. This growth was offset partly by a decline at the 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. segment. Operating Income was up 29% to $2.1 billion.
For the first nine months, Cash Provided by Operations amounted to $6.2 billion, and Free Cash Flow totaled $4.0 billion (representing a 42% conversion rate of Adjusted Operating Income before Depreciation and Amortization). As of September 30, 2007, Net Debt was $35.3 billion, up $1.9 billion from $33.4 billion at the end of 2006, due primarily to the Company's stock repurchase Stock repurchase
A firm's repurchase of outstanding shares of its common stock. programs.
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 $0.24 for the three months ended September 30, 2007, compared to $0.33 in last year's third 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. Such items did not meaningfully affect the current year quarter's diluted common share results and increased the prior year quarter's results by $0.14 per diluted common share.
Stock Repurchase Program
As of November 6, 2007, the Company has repurchased approximately 119 million shares of common stock for approximately $2.2 billion since its $5 billion program was announced on August 1, 2007. At existing price levels, the Company expects to complete at least half of the program by the time the Company reports its 2007 full-year and fourth-quarter results.
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Presented below is a discussion of Time Warner's segments for the third quarter of 2007. Unless otherwise noted, the dollar amounts in parentheses See parenthesis.
parentheses - See left parenthesis, right parenthesis. represent year-over-year changes.
Revenues declined 38% ($745 million) to $1.2 billion, resulting from a 56% decrease ($820 million) in Subscription revenues, offset partially by a 13% increase ($61 million) in Advertising revenues. The decline in Subscription revenues was due to the sales of AOL's Internet access See how to access the Internet. businesses in the U.K., France and Germany (approximately $410 million), as well as 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 users in the U.S. who have their own Internet connection. Advertising revenues benefited from growth in paid-search and display advertising on the AOL Network as well as in sales of advertising on Partner Sites.
Adjusted Operating Income before Depreciation and Amortization decreased 23% ($126 million) to $428 million, due primarily to lower Subscription revenues, offset partly by reductions in expenses, including network ($228 million) and marketing ($128 million) expenses, and growth in Advertising revenues. Additionally, the prior year quarter included 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 $27 million.
Operating Income declined 24% ($95 million) to $295 million, due primarily to lower Adjusted Operating Income before Depreciation and Amortization, offset in part by lower depreciation ($26 million) and amortization ($8 million) expenses.
During the third quarter, AOL had 113 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 48 billion domestic page views, according to according to
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 140 average monthly page views per unique visitor.
As of September 30, 2007, the AOL service had 10.1 million U.S. access subscribers, a decline of 851,000 from the prior quarter and 5.1 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
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, 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 3.7 million basic video subscribers at September 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 September 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.
As previously noted, on July 31, 2006, Time Warner Cable completed the Adelphia/Comcast Transactions and began consolidating the results of the Acquired Systems. Additionally, on January 1, 2007, Time Warner Cable began consolidating the results of the Kansas City Pool. Accordingly, the operating results for the three and nine months ended September 30, 2007, include the results for the Legacy Systems, the Acquired Systems and the Kansas City Pool for the full three- and nine-month periods, and the operating results for the three and nine months ended September 30, 2006, include the results of the Legacy Systems for the full three- and nine-month periods and the Acquired Systems for only the two months following the closing of the Adelphia/Comcast Transactions and do not include the results of the Kansas City Pool. The impact of the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged.
Incremental cost is additional or increased cost of an item or service apart from its actual cost. one month and seven months of revenues and expenses of the Acquired Systems on the results for the three and nine months ended September 30, 2007, respectively, is referred to as the "impact of the Acquired Systems" in the discussion that follows.
Revenues rose 25% ($792 million) to $4.0 billion, due primarily to the impact of the Acquired Systems, the consolidation of the Kansas City Pool ($215 million) and 9% growth in the Legacy Systems. Subscription revenues increased 25% ($749 million) to $3.8 billion, led by 21% growth in video revenues ($440 million), a 26% increase in high-speed data revenues ($197 million) and a 57% rise in voice revenues ($112 million). This growth was driven by the impact of the Acquired Systems and the consolidation of the Kansas City Pool, as well as the continued penetration of digital video services, video price increases and growth in residential high-speed data and Digital Phone subscribers. Advertising revenues increased 24% ($43 million) to $221 million, due primarily to the impact of the Acquired Systems and, to a lesser extent, growth in the Legacy Systems ($12 million).
Operating Income before Depreciation and Amortization grew 28% ($309 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. Video programming expenses increased 24% ($173 million) to $881 million. The increase in video programming expenses was due mainly to the impact of the Acquired Systems and the consolidation of the Kansas City Pool ($51 million), as well as increases in contractual rates and the expansion of service offerings. The current and prior year periods also included merger-related and restructuring charges of $4 million and $22 million, respectively.
Operating Income increased 24% ($131 million) to $681 million, reflecting primarily the increase in Operating Income before Depreciation and Amortization, offset in part by higher depreciation expense ($170 million) due mainly to the impact of the Acquired Systems, the consolidation of the Kansas City Pool and demand-driven increases in recent years of purchases of customer premise equipment.
As of September 30, 2007, Time Warner Cable served approximately 13.3 million basic video subscribers.
During the quarter, Time Warner Cable had a net increase of 522,000 revenue generating units ("RGUs"). Total RGUs were 31.5 million at September 30, 2007.
At September 30, 2007, nearly 6.9 million customers (47% of Time Warner Cable's 14.6 million customer relationships) subscribed to two or more of Time Warner Cable's primary services (video, high-speed data and voice), representing a net addition of 213,000 during the quarter. Triple play subscribers totaled 2.1 million at the end of the third quarter (15% of Time Warner Cable's customer relationships), due to 220,000 net additions, a quarterly record.
Basic video subscribers decreased a net 83,000 during the quarter, with net reductions of 11,000 basic video subscribers in the Legacy Systems and 72,000 in the Acquired Systems.
Digital video subscribers totaled 7.9 million at the end of the quarter, representing a 59% penetration of basic video customers. Digital video net additions reached 128,000 during the quarter. The Legacy Systems grew by 106,000 net additions during the third quarter, and the Acquired Systems grew by 22,000 net additions.
At September 30, 2007, Time Warner Cable had 7.4 million residential high-speed data subscribers, reflecting a 28% penetration of service-ready homes passed. Residential high-speed data net additions totaled 224,000 during the quarter. The Legacy Systems contributed net additions of 164,000 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 2.6 million, representing an 11% penetration of service-ready homes passed. Digital Phone net additions were 275,000 during the third quarter, marking the largest quarterly gain ever. The Legacy Systems grew by 156,000 net additions during the quarter, and the Acquired Systems grew by 119,000.
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 rose 33% ($788 million) to $3.2 billion, led by the strong worldwide theatrical performances of Warner Bros.' Harry Potter and the Order of the Phoenix and Ocean's 13 and New Line's Rush Hour 3 and Hairspray, as well as growth in worldwide home video, led by Warner Bros.' 300. Also contributing to the increase were higher licensing fees from television product, due to the initial off-network availabilities of 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. , Cold Case and The George Lopez
George C. Lopez (born April 23, 1961) is an American comedian and actor. He runs and produces his own show called George Lopez. Show.
Operating Income before Depreciation and Amortization grew 71% ($149 million) to $359 million, reflecting higher Revenues, offset partly by higher theatrical valuation adjustments.
Operating Income climbed 123% ($148 million) to $268 million, due primarily to the increase in Operating Income before Depreciation and Amortization.
Through November 4, 2007, Time Warner - including its Warner Bros., New Line, Warner Independent Pictures and Picturehouse studios - led all companies in domestic box office share at 19.5%.
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 nine months of 2007, garnering an industry-leading 19.7% share. The quarter's most notable home video release was 300.
At the 59th Primetime Emmy[R] Awards, Warner Bros. Television Warner Bros. Television is the television production and distribution arm of Time Warner's Warner Bros. Entertainment and The CW Television Network (in which Warner has a 50% ownership stake). earned two awards for Two and a Half Men and one 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 climbed 6% ($146 million) to $2.6 billion, reflecting a 7% increase ($106 million) in Subscription revenues and 32% growth ($66 million) in Content revenues, offset partly by a 3% decline ($22 million) in Advertising revenues. The rise in Subscription revenues resulted primarily from higher rates at both Turner and HBO and, to a lesser extent, more subscribers at Turner. The increase in Content revenues was driven by higher ancillary sales of HBO's original programming. The decrease 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 10% increase at Turner.
Adjusted Operating Income before Depreciation and Amortization grew 6% ($45 million) to $830 million, driven mainly by higher Subscription revenues, offset in part by higher programming and marketing expenses, as well as lower Advertising revenues. The prior year quarter's results also included $38 million in shutdown shut·down
A cessation of operations or activity, as at a factory.
the closing of a factory, shop, or other business
shut down costs at The WB Network.
Operating Income rose 45% ($234 million) to $751 million, due primarily to the absence of the prior year quarter's $200 million noncash goodwill 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.
1. This is usually reduced because of poorly estimated losses or gains.
2. charge and shutdown costs related to The WB Network.
During the quarter, TNT TNT: see trinitrotoluene.
in full trinitrotoluene
Pale yellow, solid organic compound made by adding nitrate (−NO2) groups to toluene. ranked #1 among advertising-supported cable networks 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. TNT's third season of The Closer continued as advertising-supported cable's #1 original series of all time with Total Viewers and Households, while TNT's Saving Grace was advertising-supported cable's #1 new original series among Households. 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 #2 in prime-time delivery of Adults 18-34. TBS' The Bill Engvall William Ray ("Bill") Engvall, Jr. (born July 271957 in Galveston, Texas) is an American comedian best known for his work as a stand-up comic and as a member of the Blue Collar Comedy group. Biography
Engvall was born and raised in Texas. Show and Tyler Perry's House of Payne Tyler Perry's House of Payne is an American television comedy-drama, currently airing on TBS. Created and produced by playwright, director, and producer Tyler Perry, the show's premise revolves around a multi-generational family living under one roof in Atlanta. were the top two advertising-supported cable original sitcoms The perspective and/or examples in this article do not represent a world-wide view. Please [ edit] this page to improve its geographical balance. with Adults 18-49. 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.
At the 59th Primetime Emmy[R] Awards, HBO received 21 awards, the most of any network for the fifth consecutive year, with six Emmys[R] for Bury 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. and three each for The Sopranos, When the Levees Broke: A Requiem requiem (rĕk`wēəm, rē`–, rā`–) [Lat.,=rest], proper Mass for the souls of the dead, performed on All Souls' Day and at funerals. in Four Acts and Rome. HBO also earned the prestigious Governor's Award for its documentary, The Addiction Project. In addition, 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. won eight awards and TNT took home two.
PUBLISHING (Time Inc.)
Revenues of $1.2 billion were essentially flat compared to the prior year quarter, reflecting higher Other revenues ($12 million) and Advertising revenues ($1 million), offset by lower Subscription revenues ($8 million) and Content revenues ($1 million). The increase in Other revenues was due to growth at 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 Southern Living at Home. Advertising revenues benefited mainly from higher digital revenues ($25 million), led by People.com and CNNMoney.com, offset by a decrease in print magazine revenues, which included the impact of the closures of LIFE and Teen People magazines. Driving the decline in Subscription revenues was the closure of Teen People and the divestment divestment to strip one's investment from an entity. of four non-strategic magazine titles.
Adjusted Operating Income before Depreciation and Amortization increased 12% ($33 million) to $298 million, due mainly to growth in non-magazine businesses, particularly Synapse, as well as increases in domestic magazines.
Operating Income rose 13% ($29 million) to $251 million, due primarily to an increase in Adjusted Operating Income before Depreciation and Amortization.
Based on Publishers Information Bureau (PIB See NIST binary. ) data, Time Inc.'s 2007 industry-leading share of overall domestic advertising through September 30, exclusive of newspaper supplements, was 18.7%.
CONSOLIDATED REPORTED NET INCOME AND PER SHARE RESULTS
For the three months ended September 30, 2007, the Company reported Net Income of $1.1 billion, or $0.29 per diluted common share. This compares to Net Income in the prior year quarter of $2.3 billion, or $0.57 per diluted common share.
For the three months ended September 30, 2007, the Company reported Income before Discontinued Operations and Cumulative Effect of Accounting Change of $900 million, or $0.24 per diluted common share. This compares to Income before Discontinued Operations and Cumulative Effect of Accounting Change in the prior year quarter of $1.3 billion, or $0.33 per diluted common share.
The Company's effective tax rate for 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 was 38% and 25% for the three months ended September 30, 2007 and 2006, respectively. The increase was primarily attributable to the higher tax attribute carryforwards recognized in the third quarter of 2006. The income tax provision for the three months ended September 30, 2007, also reflected a charge of approximately $47 million relating to relating to relate prep → concernant
relating to relate prep → bezüglich +gen, mit Bezug auf +acc an adjustment to tax benefits recognized in prior periods associated with certain foreign source income, partially offset by a tax benefit of approximately $24 million associated with domestic research and development tax credits.
Certain pretax pre·tax
Existing before tax deductions: pretax income.
pretax adj [profit] → vor (Abzug der) Steuern items in the current year quarter affected comparability, including $14 million in other net investment gains and $12 million of tax benefits related mainly to the realization of tax attribute carryforwards.
Certain pretax items in the prior year quarter similarly affected comparability, including $727 million in net investment gains, related primarily to the sales of the Company's interest in Time Warner Telecom Time Warner Telecom NASDAQ: TWTC is headquartered in Littleton, Colorado.
The company provides managed network services, specializing in Ethernet and transport data networking, Internet access, local and long distance voice, VoIP and security, to enterprise Inc. and Warner Bros.' Australian theme parks, offset in part by $29 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. The prior year quarter also included $373 million of tax benefits related mainly to the realization of tax attribute carryforwards. In addition, the Company recorded a pretax impairment charge in the prior year quarter of approximately $200 million to reduce the carrying value Carrying Value
Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt.
This is different than market value, as it can be higher or lower depending on the circumstances. of The WB Network's goodwill.
In aggregate, these items affecting comparability had the net effect of increasing the current year quarter's Income before Discontinued Operations and Cumulative Effect of Accounting Change by $18 million (net of taxes), with no meaningful effect per diluted common share, and increasing the prior year quarter by $589 million (net of taxes), or $0.14 per diluted common share. Excluding such items, Income before Discontinued Operations and Cumulative Effect of Accounting Change increased, reflecting growth in Adjusted Operating Income before Depreciation and Amortization, offset partly by higher depreciation and interest expenses related to the Adelphia and Comcast transactions. 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 the increase in Income before Discontinued Operations and Cumulative Effect of Accounting Change, as well as a decrease in average diluted common shares as a result of common stock repurchases made under the stock repurchase programs.
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.
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.
Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. that were primarily 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 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 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, November 7, 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 third-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, November 7, 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. 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.
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.
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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 nine months of 2007, which include the Parenting Group, most of the Time4 Media magazine titles, The Progressive Farmer magazine, Leisure Arts, Inc. ("Leisure Arts"), 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 (the "Braves"), Tegic Communications, Inc. ("Tegic") and Wildseed LLC ("Wildseed"). In the third quarter of 2006, the Company closed on the acquisition of certain assets of Adelphia Communications Corporation ("Adelphia") (the "Adelphia Acquisition") and the related exchange of certain cable systems with Comcast Corporation ("Comcast") (the "Exchange") and redemption of Comcast's interests in Time Warner Cable Inc. ("TWC") and Time Warner Entertainment Company, L.P. (the "Redemptions"). The operations of the cable systems transferred to Comcast in connection with the Redemptions and the Exchange (the "Transferred Systems"), including gains recognized on the transfers, have been reflected as discontinued operations for the three and nine months ended September 30, 2006. Also included in discontinued operations for the nine months ended September 30, 2006 are the operations of the Turner South network ("Turner South") and Time Warner Book Group ("TWBG TWBG That Would Be Great "), which were sold during the first six months of 2006. The financial data for the discontinued operations for the three and nine months ended September 30, 2007 and 2006 is as follows (millions, except per share amounts):
Included in discontinued operations for the three and nine months ended September 30, 2007 were a pretax gain of approximately $200 million and a related tax provision of approximately $15 million on the sale of Tegic. The tax provision on the sale of Tegic included a tax benefit associated with the use of tax attribute carryforwards, partially offset by a tax charge attributable to the reversal of a deferred tax asset. In addition, discontinued operations for the nine months ended September 30, 2007 included a pretax gain of approximately $71 million and a related tax benefit of approximately $82 million on the sale of the Braves, a pretax gain of approximately $54 million and a related tax benefit of approximately $6 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. The tax benefit recognized for the Braves transaction 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. The tax benefit recognized for the magazine sale transaction resulted primarily from the recognition of deferred tax assets associated with the sale of the magazine titles. In addition, for the three and nine months ended September 30, 2007, respectively, the Company incurred an additional $1 million and $18 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, and for the nine months ended September 30, 2007, the Company made payments of $26 million related to Warner Music Group indemnification liabilities established in prior years, which are disclosed on the Company's consolidated statement of cash flows as Investment activities of discontinued operations.
Included in discontinued operations for the three and nine months ended September 30, 2006 were a pretax gain of approximately $145 million on the Transferred Systems and a tax benefit of approximately $810 million, comprised of a tax benefit of $817 million on the Redemptions, partially offset by a provision of $7 million on the Exchange. The tax benefit of $817 million resulted primarily from the reversal of historical deferred tax liabilities (included in noncurrent liabilities Noncurrent liability
A liability due in one year.
A liability not due to be paid within one year during the normal course of business. A long-term debt issue is a noncurrent liability. of discontinued operations) that had existed on systems transferred to Comcast in the TWC Redemption. The TWC Redemption was designed to qualify as a tax-free split-off under Section 355 of the Internal Revenue Code of 1986, as amended, and, as a result, such liabilities were no longer required. However, if the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. were successful in challenging the tax-free characterization of the TWC Redemption, an additional cash liability on account of taxes of up to an estimated $900 million could become payable by the Company. The results for the nine months ended September 30, 2006 also included a pretax gain of approximately $129 million and a related tax benefit of approximately $21 million on the sale of Turner South and a pretax gain of approximately $194 million and a related tax benefit of approximately $28 million on the sale of TWBG. The tax benefits 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.