Time Warner Reports Results for 2004 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 full year and fourth quarter ended December December: see month. 31, 2004. 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 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 that we posted such an impressive year in 2004. Our financial performance was strong, meeting or exceeding all of our full-year objectives, and greatly enhancing our flexibility. Our revenues increased $2.5 billion, or 6%, over the prior year. Our 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 13%, with all of our segments growing double-digits. Once again, we expect our Free Cash Flow to lead the industry, totaling $3.3 billion, which helped us reduce net debt by $6.5 billion in 2004. "During the year, we continued to run our businesses best in class. For example, our studios once more ranked #1 in global box office and home video, while 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) finished the year as the top two ad-supported cable networks in the delivery of key audiences. In addition, we're we're Contraction of we are. we're we are prudently pru·dent adj. 1. Wise in handling practical matters; exercising good judgment or common sense. 2. Careful in regard to one's own interests; provident. 3. Careful about one's conduct; circumspect. investing to extend the competitive leadership of our businesses. For example, 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. deployed Digital Phone in all of its divisions. Time Inc. launched four magazines to build on its undisputed leadership of the magazine publishing industry worldwide. And America Online See AOL. acquired Advertising.com to help it better monetize Monetize 1. To convert into money. 2. To convert from securities into currency that can be used to purchase goods and services. Notes: For example, you'll often hear Internet marketers talk about "monetizing website visitors. its vast online audience. "We plan to build on these successes over the coming year. My 2005 goal is to extend our competitive leadership, while continuing to deliver strong financial results. With our expanding financial and strategic flexibility, we'll we'll Contraction of we will. we'll we will or we shall we'll will ~shall look at investments that build on our current competencies, deliver attractive returns and enable us to take advantage of exciting growth opportunities." Full-Year Results Revenues rose 6% over 2003 to $42.1 billion, reflecting increases at each of the Company's reporting segments. Adjusted Operating Income before Depreciation and Amortization climbed to $9.9 billion, up 13% from $8.7 billion in the prior year, driven by double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. increases across all segments. These results exclude the impact of $510 million in legal reserves related to the government investigations, as well as asset impairments and gains and losses on asset sales (See Performance of Segments). Operating Income improved 17% to $6.2 billion in 2004 from $5.3 billion in 2003. Cash Provided by Operations was $6.6 billion, and Free Cash Flow was $3.3 billion (representing a 33% conversion rate of Adjusted Operating Income before Depreciation and Amortization), including such fourth-quarter items as an accelerated $310 million contribution to pension plans initially planned for 2005 and a $210 million payment related to the settlement with the Department of Justice. As of December 31, Net Debt totaled $16.2 billion, down $6.5 billion from $22.7 billion at the start of 2004. 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 $0.68 for both the years ended December 31, 2004 and 2003. The current- and prior-year amounts included certain items affecting comparability that are described in detail 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 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. The net impact of such items was to decrease the current-year results by $0.01 and raise prior-year results by $0.23 per diluted common share. Fourth-Quarter Results Revenues climbed $206 million over the prior-year quarter to $11.1 billion, led by increases at the Cable and Networks segments. Adjusted Operating Income before Depreciation and Amortization rose 3% to $2.4 billion, with growth at all of the segments except Filmed Entertainment. Operating Income improved 7% to $1.6 billion. Diluted Income per Common Share before discontinued operations and cumulative effect of accounting change was $0.24 for both the three months ended December 31, 2004 and 2003. The current- and prior-year amounts included certain items affecting comparability that are described in detail in the accompanying Consolidated Reported Net Income and Per Share Results section. The net impact of such items was to increase the current-year results by $0.04 and raise prior-year results by $0.09 per diluted common share. 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 Months and Twelve Months Ended December 31:
Three Months Twelve Months
Ended Ended
December 31, December 31,
Revenues: 2004 2003 2004 2003
---- ---- ---- ----
AOL $ 2,183 $ 2,156 $ 8,692 $ 8,598
Cable 2,204 2,003 8,484 7,699
Filmed Entertainment 3,272 3,378 11,853 10,967
Networks 2,293 2,168 9,054 8,434
Publishing 1,639 1,633 5,565 5,533
Intersegment Eliminations (481) (434) (1,559) (1,668)
----- ----- ----- -----
Total Revenues $ 11,110 $ 10,904 $ 42,089 $ 39,563
-------------- ======== ======== ======== ========
Adjusted Operating Income before Depreciation and Amortization (a):
AOL (b) $ 326 $ 301 $ 1,762 $ 1,505
Cable 887 797 3,278 2,992
Filmed Entertainment (c) 284 389 1,474 1,312
Networks (d) 663 602 2,701 2,246
Publishing (e) 405 376 1,188 1,083
Corporate (f) (119) (102) (510) (424)
Intersegment Eliminations (18) (3) (22) (17)
----- ----- ----- -----
Total Adjusted Operating
Income Before Depreciation
and Amortization (a) $ 2,428 $ 2,360 $ 9,871 $ 8,697
-------------------------- ======== ======== ======== ========
Operating Income:
AOL (b) $ 120 $ 110 $ 934 $ 662
Cable 497 377 1,764 1,531
Filmed Entertainment (c) 201 313 1,157 1,063
Networks (d) 602 545 2,461 1,809
Publishing (e) 341 261 934 664
Corporate (f) (140) (111) (1,063) (458)
Intersegment Eliminations (18) (3) (22) (17)
----- ----- ----- -----
Total Operating Income $ 1,603 $ 1,492 $ 6,165 $ 5,254
---------------------- ======== ======== ======== ========
(a) Adjusted Operating Income before Depreciation and Amortization
excludes the impact of non-cash impairments of goodwill,
intangible and fixed assets, as well as gains and losses on asset
sales, legal reserves related to the government investigations and
legal reserves that may be established in connection with the
pending securities litigation. Refer to reconciliation of Adjusted
Operating Income before Depreciation and Amortization to Operating
Income before Depreciation and Amortization on pages 17 and 18.
Operating Income includes these items in their respective periods.
(b) For the three and twelve months ended December 31, 2004, Adjusted
Operating Income before Depreciation and Amortization excludes a
$7 million gain on the sale of Netscape Security Solutions; for
the twelve months ended December 31, 2004, it also excludes a $13
million gain on the sale of AOL Japan and a $10 million non-cash
impairment related to a building being held for sale. Operating
Income includes these items in their respective periods.
(c) For the twelve months ended December 31, 2003, Adjusted Operating
Income before Depreciation and Amortization excludes a $43 million
gain related to the sale of consolidated cinemas in the UK.
Operating Income includes this amount in the period.
(d) For the twelve months ended December 31, 2003, Adjusted Operating
Income before Depreciation and Amortization excludes a non-cash
impairment of $219 million in intangible assets related to the
winter sports teams (the Atlanta Thrashers, an NHL team, and the
Atlanta Hawks, an NBA team); for the twelve months ended December
31, 2004, it excludes an approximate $7 million loss related to
the sale of the winter sports teams. Operating Income includes
these items in their respective periods.
(e) For the twelve months ended December 31, 2003, Adjusted Operating
Income before Depreciation and Amortization excludes a non-cash
impairment of $99 million in goodwill and intangible assets
related to the Time Warner Book Group and a $29 million loss on
the sale of Time Life; for the twelve months ended December 31,
2004, it excludes an $8 million gain related to the sale of a
building. Operating Income includes these items in their
respective periods.
(f) For the three and twelve months ended December 31, 2004, Adjusted
Operating Income before Depreciation and Amortization excludes the
impact of $10 million and $510 million, respectively, in legal
reserves related to the government investigations. Operating
Income includes these items in their respective periods.
Presented below is a discussion of Time Warner's business segments for the fourth quarter and full year 2004. Unless otherwise noted, the dollar amounts noted in parentheses See parenthesis. parentheses - See left parenthesis, right parenthesis. represent year-over-year changes. 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. (America Online) Full-Year Results Revenues rose 1% ($94 million) to $8.7 billion. These results represent a 28% increase ($220 million) in Advertising revenues, offset partially by a 2% decline ($116 million) in Subscription revenues. Growth in Advertising came from a 51% increase ($102 million) in domestic paid search and a $33 million increase from AOL 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). , as well
as revenues from the Advertising.com acquisition ($97 million), which
was acquired on August 2. The decrease in Subscription revenues reflects
a decline in domestic revenues ($370 million) due to the decrease in
membership and an increase in value-added taxes value-added tax (VAT), levy imposed on business at all levels of the manufacture and production of a good or service and based on the increase in price, or value, provided by each level. in Europe ($64 million).
Included in revenues was an increase of $168 million from changes in
foreign currency exchange rates.Adjusted Operating Income before Depreciation and Amortization climbed 17% ($257 million) to $1.8 billion, benefiting from a reduction in network expenses ($669 million) and higher Advertising revenues, offset partially by lower domestic Subscription revenues, and higher marketing and other expenses. The current and prior year reflected 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 $50 million and $52 million, respectively. Operating Income grew 41% ($272 million) to $934 million, benefiting primarily from the increase in Adjusted Operating Income before Depreciation and Amortization. Fourth-Quarter Results Revenues rose 1% ($27 million) to $2.2 billion. Adjusted Operating Income before Depreciation and Amortization climbed 8% ($25 million) to $326 million. The current- and prior-year quarters reflected restructuring charges of $52 million and $22 million, respectively. The current year 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 taxes pursuant to the 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 . Operating Income grew 9% ($10 million) to $120 million, benefiting from the increase in Adjusted Operating Income before Depreciation and Amortization and a $7 million gain on the sale of the 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, offset partly by higher depreciation expense. Highlights At December 31, the AOL service totaled 22.2 million domestic members, a decline of 464,000 from the prior quarter and a decrease of 2.0 million from the year-ago quarter. In Europe, the AOL service had 6.3 million members, an increase of 9,000 from the previous quarter and a decrease of 49,000 from last year's quarter. CABLE (Time Warner Cable) Full-Year Results Revenues grew 10% ($785 million) to $8.5 billion, representing a 10% increase ($736 million) in Subscription revenues and an 11% rise ($49 million) in Advertising revenues. Driving Subscription revenues were increases of 24% ($338 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 and 25% ($131 million) in enhanced digital video service 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 11% to about $76. Operating Income before Depreciation and Amortization rose 10% ($286 million) to $3.3 billion, benefiting from the growth in revenues, offset in part by a 12% increase in programming expenses ($204 million), higher marketing and 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 and a legal settlement of $34 million related to the Urban Cable joint venture. The current year also included net losses of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $45 million related to the roll-out of the new Digital Phone service. Operating Income climbed 15% ($233 million) to $1.8 billion, due to the increase in Operating Income before Depreciation and Amortization, offset partly by higher depreciation and amortization expenses ($53 million). Fourth-Quarter Results Revenues rose 10% ($201 million) to $2.2 billion. Operating Income before Depreciation and Amortization grew 11% ($90 million) to $887 million. The prior-year quarter reflected restructuring charges of $15 million. Operating Income climbed 32% ($120 million) to $497 million. Highlights At December 31, Time Warner Cable managed 10.9 million basic video cable subscribers, which included nearly 1.6 million subscribers in unconsolidated joint ventures. Basic video cable subscribers declined 14,000 in the quarter and 35,000 for the full year. Digital video subscribers climbed 124,000 in the quarter and 457,000 for the full year for a total of 4.8 million, which represented 44% of basic video cable subscribers. Digital Video Recorder See DVR. subscribers increased 153,000 during the quarter and 493,000 for the full year to 862,000 subscribers. Subscription Video-On-Demand The ability to deliver a movie, sports event or other video program to a TV set whenever the customer requests it. Video-on-demand (VOD) typically refers to free and paid programs from the cable TV companies or the telephone companies that offer video over DSL lines. subscribers rose 171,000 in the quarter and 595,000 for the full year for a total of 1.5 million subscribers. Penetration The successful unauthorized breach of a security perimeter. See penetration test. rates for Digital Video Recorder services and Subscription Video-On-Demand services reached 18% and 32% of digital video customers, respectively. Residential high-speed data subscribers grew by 197,000 during the quarter and 685,000 for the full year for a total of 3.9 million, representing 21% of service-ready homes passed. Time Warner Cable has commercially deployed Digital Phone to all 31 of its divisions and ended the year with 220,000 digital phone subscribers. FILMED ENTERTAINMENT (Warner Bros BROS Brothers BROS Benefits and Retirement Operations Section (King County, Washington) BROS Barnes and Richmond Operatic Society (London, UK) . Entertainment and New Line Cinema) Full-Year Results Revenues rose 8% ($886 million) to $11.9 billion, driven by higher television licensing fees, led by third-cycle syndication See syndication format. sales of Seinfeld
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 and overages from New Line's The Lord of the Rings: The
Return of the King. These increases were offset partly by difficult
comparisons to the prior-year domestic theatrical results.Adjusted Operating Income before Depreciation and Amortization grew 12% ($162 million) to $1.5 billion, due primarily to higher contributions from television and theatrical operations, including lower film valuation adjustments. This growth was offset in part by a lower contribution from consumer products. Operating Income improved 9% ($94 million) to $1.2 billion, benefiting from the increase in Adjusted Operating Income before Depreciation and Amortization, offset partially by the absence of a $43 million gain on an asset sale in the prior year and higher depreciation and amortization expenses. Fourth-Quarter Results Revenues decreased 3% ($106 million) to $3.3 billion. Operating Income before Depreciation and Amortization declined 27% ($105 million) to $284 million. Operating Income decreased 36% ($112 million) to $201 million, driven by the decline in Operating Income before Depreciation and Amortization and an increase in depreciation expense. Highlights For the fourth consecutive year, 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. captured an industry-leading 19.7% share of 2004 home video sales and rentals in the US - ranking #1 in DVD DVD: see digital versatile disc. DVD in full digital video disc or digital versatile disc Type of optical disc. The DVD represents the second generation of compact-disc (CD) technology. sales and rentals. Notable home video releases included Warner Bros.' Harry Potter and the Prisoner of Azkaban, The Matrix Revolutions and The Last Samurai, as well as New Line's The Lord of the Rings: The Return of the King and Elf elf, in Germanic mythology, a type of fairy. Usually represented as tiny people, elves are said to dwell in forests, in the sea, and in the air. Although they can be friendly to man, they are more frequently vengeful and mischievous. . For the fourth consecutive year, the Company's film studios combined for the #1 position in global box office, with Warner Bros. Pictures International becoming the first studio ever to surpass $2 billion in one year at the overseas box office. In domestic box office, Warner Bros. and New Line generated $1.2 billion and $388 million, respectively, for a combined industry-leading share of 17.4% in 2004. At the 62nd Annual Golden Globe Awards, Warner Bros. Pictures collected five awards. The Aviator won three, the most for a theatrical film, and Million Dollar Baby earned two. The Sea Inside from New Line's Fine Line Features and Warner Bros. Television's Nip/Tuck Nip/Tuck is an Emmy and Golden Globe award-winning American television medical drama series created by Ryan Murphy for FX Networks. The show follows the lives of two Miami plastic surgeons, Sean McNamara (Dylan Walsh) and Christian Troy (Julian McMahon). each took home one Golden Globe. Last week, Warner Bros. set a record for its most ever Academy Award nominations with 30 -- leading all of the other studios -- including 11 nominations for The Aviator, seven for Million Dollar Baby and three each for The Polar Express and The Phantom of the Opera. New Line's Fine Line Features earned six nominations, with three for Vera Drake drake 1. male duck. 2. loliumtemulentum. , two for The Sea Inside and one for Maria Full of Grace (with HBO Hyperbaric oxygen therapy (HBO) A form of oxygen therapy in which the patient breathes oxygen in a pressurized chamber. Mentioned in: Ozone Therapy Films). NETWORKS (Turner Turner can refer to:
Full-Year Results Revenues rose 7% ($620 million) to $9.1 billion, benefiting from growth in both Subscription and Advertising revenues. Subscription revenues climbed 10% ($470 million), due to higher rates and increased subscribers at Turner and HBO. The 8% growth ($220 million) in Advertising revenues includes an 11% increase at the Turner networks, while The WB Network was flat. Offsetting this growth in part were declines in Content and Other revenues ($70 million), due mainly to lower revenues related to the sale of Turner's winter sports winter sports: see bobsledding; curling; hockey, ice; ice dancing; ice skating; skiing; snowshoes; tobogganing. teams ($83 million). Adjusted Operating Income before Depreciation and Amortization increased 20% ($455 million) to $2.7 billion. Higher Subscription and Advertising revenues and lower bad debt expenses ($110 million - primarily related to certain cable operators) were offset partly by higher programming and marketing expenses. The prior year included $21 million in restructuring charges. Operating Income rose 36% ($652 million) to $2.5 billion, reflecting the increase in Adjusted Operating Income before Depreciation and Amortization and the absence of the prior year's $219 million in 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. charges, offset partially by higher depreciation expense. Fourth-Quarter Results Revenues grew 6% ($125 million) to $2.3 billion. Operating Income before Depreciation and Amortization increased 10% ($61 million) to $663 million. Operating Income rose 10% ($57 million) to $602 million, reflecting the increase in Operating Income before Depreciation and Amortization, offset in part by higher depreciation expense. Highlights Once again among advertising-supported cable networks, TNT won the cable ratings crown - sweeping adults 18-49 and 25-54 in prime time and in total day. In 2004, TNT delivered more adults 25-54 in total day and prime time than any other advertising-supported cable network in history. TBS, re-branded as "very funny" in 2004, ranked #1 in adults 18-34 in total day, setting an advertising-supported cable record. HBO earned four Golden Globe awards - the most of any television network - with two for The Life and Death of Peter Sellers Noun 1. Peter Sellers - English comic actor (1925-1980) Sellers , including Best Mini-Series mini-series n → serie f de pocos capítulos; miniserie f mini-series n → téléfilm m en plusieurs parties or Motion Picture Made for Television, and one each for Deadwood Deadwood, city (1990 pop. 1,830), seat of Lawrence co., W S.Dak.; settled 1876 after discovery of gold. A Black Hills tourist center, it is also a trade hub for a lumbering, stock-raising, and mining region. and Iron Jawed jawed adj. Having a jaw or jaws, especially of a specified kind. Often used in combination: slack-jawed; the jawed fishes. Adj. 1. Angels. Last week, HBO received seven Academy Award nominations, including three for Best Documentary documentary: see motion pictures. documentary Fact-based film that depicts actual events and persons. Documentaries can deal with scientific or educational topics, can be a form of journalism or social commentary, or can be a conduit for propaganda Short Subject, two for Best Documentary Feature and two for Best Foreign Language Film (sharing the Maria Full of Grace nomination NOMINATION, This word has several significations. 1. An appointment; as, I nominate A B, executor of this my last will. 2. A proposition; the word nominate is used in this sense in the constitution of the United States, art. 2, s. with New Line's Fine Line Features). PUBLISHING (Time Inc.) Full-Year Results Revenues grew 1% ($32 million) to $5.6 billion, reflecting a 9% increase ($233 million) in Advertising revenues - driven by growth at Real Simple, Time, In Style, 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. , Fortune and Entertainment Weekly - as well as a 5% rise ($82 million) in Subscription revenues and higher Content revenues, led by the Time Warner Book Group, offset largely by the absence of revenues from Time Life following last year's sale of the business ($352 million in 2003). Included in 2004 revenues was an increase of $91 million from changes in foreign currency exchange rates. Adjusted Operating Income before Depreciation and Amortization climbed 10% ($105 million) to $1.2 billion, due primarily to growth in revenues and the absence of the prior-year's loss at Time Life ($72 million), offset partly by 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. start-up Start-up The earliest stage of a new business venture. losses associated with the launch of new magazines ($44 million). Operating Income rose 41% ($270 million) to $934 million, benefiting from the increase in Adjusted Operating Income before Depreciation and Amortization and the absence of the prior-year's $99 million in impairment charges and $29 million loss on the sale of Time Life, as well as lower amortization expense. Fourth-Quarter Results Revenues were essentially flat at $1.6 billion. Adjusted Operating Income before Depreciation and Amortization rose 8% ($29 million) to $405 million. Operating Income climbed 31% ($80 million) to $341 million, driven by the increase in Adjusted Operating Income before Depreciation and Amortization and the absence of the prior-year loss on the sale of Time Life ($29 million), as well as lower amortization expense. Highlights During the year, Time Inc. launched four magazines, including All You, Cottage COTTAGE, estates. A small dwelling house. See 1 Tho. Co. Litt. 216; Sheph. Touchst. 94; 2 Bouv. Inst. n. 1571, note. 2. The grant of a cottage, it is said, passes a small dwelling-house, which has no land belonging to it. Shep. To. 94. Living, Nuts and the re-launch of Life. Based on Publishers Information Bureau (PIB See NIST binary. ) data, Time Inc.'s 2004 industry-leading share of overall domestic advertising revenues was 24.2%, nearly an all-time all-time adj. Exceeding all others up to the present time: an all-time speed skating record. all-time Adjective Informal high. The Time Warner Book Group added 16 titles to The New York Times bestseller list this quarter, bringing the 2004 total to 58. Major new titles in the quarter included James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. Patterson's London Bridges London Bridge, granite, five-arched bridge formerly over the Thames, in London, England. It is 928 ft (283 m) long and was designed by John Rennie and built between 1824 and 1831. and Nelson DeMille's Night Fall. In addition, Jon JON Jonah JON Jesus of Nazareth JON Job Order Number JON Johnston Island, US, Outlying Islands (Airport Code) Stewart's Stewart's or Stuart's can refer to:
Consolidated Reported Net Income and Per Share Results Full-Year Results For the year ended December 31, 2004, the Company reported Net Income of $3.4 billion, or $0.72 per diluted common share. This compares to 2003 Net Income of $2.6 billion, or $0.57 per diluted common share. For the year ended December 31, 2004, the Company reported Income before Discontinued Operations and Cumulative Effect of Accounting Change of $3.2 billion, or $0.68 per diluted common share. This compares to Income before Discontinued Operations and Cumulative Effect of Accounting Change in 2003 of $3.1 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 amount affected comparability, including $510 million in legal reserves related to the government investigations, a $10 million impairment related to a building being held for sale 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 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. 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 current year also included $424 million in pre-tax net investment gains, which includes $188 million, $113 million and $44 million related to the sale of investments 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). , 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 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 pre-tax items in the prior-year amount similarly affected comparability, including $593 million of gains related to certain investments, principally the sale of the Company's interest in Comedy Central of $513 million, a gain of $760 million associated with the Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. settlement and a $43 million gain on the sale of Warner Bros. Entertainment's consolidated cinemas in the UK, offset partly by a total of $318 million in non-cash impairments of goodwill and 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. at the Networks and Publishing segments, as well as a $29 million loss on the sale of Time Life. The prior-year amount also included a $450 million tax benefit associated with the realization of net capital loss carryforwards. In aggregate, the items noted above had the net effect of decreasing the current year's Net Income by $16 million (net of taxes) or $0.01 per diluted common share and increasing the previous period's net income by $1.1 billion (net of taxes) or $0.23 per diluted common share. Excluding such items, the growth in Net Income and Diluted Net Income per Share was driven primarily by an increase in Operating Income, lower interest expense and improved results from equity investees, offset partly by a higher tax provision. Fourth-Quarter Results For the three months ended December 31, 2004, the Company reported Net Income of $1.1 billion, or $0.24 per diluted common share. This compares to Net Income in the 2003 comparable quarter of $639 million, or $0.14 per diluted common share. For the three months ended December 31, 2004, the Company reported Income before Discontinued Operations and Cumulative Effect of Accounting Change of $1.1 billion, or $0.24 per diluted common share. This compares to Income before Discontinued Operations and Cumulative Effect of Accounting Change in 2003 of $1.1 billion, or $0.24 per diluted common share. Certain pre-tax items in the current year amount affected comparability, including $82 million in net gains, primarily due 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 an additional $10 million in legal reserves related to the government investigations. The current-year amount also included a $110 million tax benefit associated with the realization of net capital loss carryforwards. Certain pre-tax items in the prior-year quarter's amount similarly affected comparability, including a $29 million loss on the sale of Time Life and $18 million in net investment losses. The prior-year amount also included a $450 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's Net Income by $185 million (net of taxes) or $0.04 per diluted common share and increasing the previous period's net income by $423 million (net of taxes) or $0.09 per diluted common share. Excluding such items, the growth in Net Income and Diluted Net Income per Share was driven primarily by an increase in Operating Income, lower interest expense, improved results from equity investees, and a lower tax provision primarily resulting from the release of certain tax reserves and related interest, as well as additional benefits associated with certain foreign source income recognized with the finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of prior year tax filings. Use of Operating Income before Depreciation and Amortization, Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow 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 non-cash 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, legal reserves related to the government investigations, and legal reserves that may be established in connection with the pending 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. (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 non-cash depreciation of tangible assets Tangible Asset An asset that has a physical form such as machinery, buildings and land. Notes: This is the opposite of an intangible asset such as a patent or trademark. Whether an asset is tangible or intangible isn't inherently good or bad. and amortization of certain intangible 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 the diminution in value diminution in value n. in the event of a breach of contract, the decrease in value of property due to the failure to construct something exactly as specified in the contract. of goodwill and intangible assets or gains and losses on asset sales. Management evaluates the costs of such tangible and intangible assets, the impact of related impairments, as well as asset sales through other financial measures, such as capital expenditures, investment spending and return on capital. Free Cash Flow is Cash Provided by Operations (as defined by accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ) less cash provided by discontinued operations, capital expenditures and product development costs, principal payments on capital leases, and partnership distributions, if any. Free Cash Flow is considered to be 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. 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 accounting principles generally accepted in the United States. 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 In a separate release issued today, Time Warner Inc. provided its 2005 full-year business outlook. The Company's earnings conference call can be heard live at 9 am ET on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , February February: see month. 4, 2005. 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 its most recent 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,
2004 2003
----------- -----------
(millions, except
per share amounts)
ASSETS
Current assets
Cash and equivalents $ 6,139 $ 3,040
Restricted cash 150 -
Receivables, less allowances of
$2.109 and $2.079 billion 5,512 4,908
Inventories 1,737 1,390
Prepaid expenses and other current assets 1,101 1,255
Current assets of discontinued operations - 1,675
----------- -----------
Total current assets 14,639 12,268
Noncurrent inventories and film costs 4,415 4,465
Investments, including available-for-
sale securities 4,703 3,770
Property, plant and equipment 13,094 12,559
Intangible assets subject to amortization 3,892 4,229
Intangible assets not subject to
amortization 39,656 39,656
Goodwill 39,667 39,459
Other assets 3,273 2,742
Noncurrent assets of discontinued
operations - 2,632
----------- -----------
Total assets $ 123,339 $ 121,780
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,494 $ 1,629
Participations payable 2,579 1,955
Royalties and programming costs payable 1,018 1,022
Deferred revenue 1,497 1,731
Debt due within one year 1,672 2,287
Other current liabilities 6,313 6,097
Current liabilities of discontinued
operations 51 1,574
----------- -----------
Total current liabilities 14,624 16,295
Long-term debt 20,703 23,458
Deferred income taxes 14,943 12,655
Deferred revenue 905 955
Mandatorily convertible preferred stock 1,500 1,500
Other liabilities 4,341 4,452
Noncurrent liabilities of discontinued
operations 38 901
Minority interests 5,514 5,351
Shareholders' equity
Series LMCN-V common stock, $0.01 par
value, 105.7 and 171.2 million shares
outstanding in each period 1 2
Time Warner common stock, $0.01 par
value, 4.483 and 4.365 billion shares
outstanding 45 44
Paid-in capital 156,252 155,579
Accumulated other comprehensive income
(loss), net 106 (415)
Accumulated deficit (95,633) (98,997)
----------- -----------
Total shareholders' equity 60,771 56,213
----------- -----------
Total liabilities and shareholders'
equity $ 123,339 $ 121,780
=========== ===========
See accompanying notes.
TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Year
Ended Ended
December 31, December 31,
---------------- ----------------
2004 2003 2004 2003
------ ------ ------ ------
(millions, except per share amounts)
Revenues:
Subscriptions $5,438 $5,245 $21,605 $20,448
Advertising 2,016 1,742 6,955 6,180
Content 3,348 3,507 12,350 11,446
Other 308 410 1,179 1,489
Total revenues 11,110 10,904 42,089 39,563
Costs of revenues (6,489) (6,452) (24,449) (23,422)
Selling, general and
administrative (2,804) (2,684) (10,300) (9,834)
Amortization of intangible
assets (159) (210) (626) (640)
Legal reserves related to
the government investigations (10) - (510) -
Restructuring costs (52) (37) (50) (109)
Asset impairments - - (10) (318)
Gains (losses) on disposal
of assets, net 7 (29) 21 14
------ ------ ------ ------
Operating income 1,603 1,492 6,165 5,254
Interest expense, net (374) (415) (1,533) (1,734)
Other income (expense), net 153 (40) 521 1,210
Minority interest expense, net (74) (39) (246) (214)
------ ------ ------ ------
Income before income taxes,
discontinued operations and
cumulative effect of
accounting change 1,308 998 4,907 4,516
Income tax benefit (provision) (187) 107 (1,698) (1,370)
------ ------ ------ ------
Income before discontinued
operations and cumulative
effect of accounting change 1,121 1,105 3,209 3,146
Discontinued operations, net
of tax 6 (466) 121 (495)
------ ------ ------ ------
Income before cumulative effect
of accounting change 1,127 639 3,330 2,651
Cumulative effect of accounting
change - - 34 (12)
------ ------ ------ ------
Net income $1,127 $639 $3,364 $2,639
====== ====== ====== ======
Basic income per common share
before discontinued operations
and cumulative effect of
accounting change $0.24 $0.24 $0.70 $0.70
Discontinued operations 0.01 (0.10) 0.03 (0.11)
Cumulative effect of accounting
change - - 0.01 -
------ ------ ------ ------
Basic net income per
common share $0.25 $0.14 $0.74 $0.59
====== ====== ====== ======
Diluted income per common share
before discontinued operations
and cumulative effect of
accounting change $0.24 $0.24 $0.68 $0.68
Discontinued operations - (0.10) 0.03 (0.11)
Cumulative effect of
accounting change - - 0.01 -
------ ------ ------ ------
Diluted net income per
common share $0.24 $0.14 $0.72 $0.57
====== ====== ====== ======
Average basic common shares 4,576.4 4,525.6 4,560.2 4,506.0
====== ====== ====== ======
Average diluted common shares 4,706.8 4,669.6 4,694.7 4,623.7
====== ====== ====== ======
See accompanying notes.
TIME WARNER INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Unaudited)
2004 2003
------ ------
(millions)
OPERATIONS
Net income(a) $3,364 $2,639
Adjustments for noncash and nonoperating items:
Cumulative effect of accounting change (34) 12
Depreciation and amortization 3,207 3,139
Amortization of film costs 2,925 2,584
Asset impairments 10 318
Loss on writedown of investments 15 212
Gain on sale of investments, net (447) (810)
Equity in losses of investee companies and
cash distributions 20 154
Changes in operating assets and liabilities,
net of acquisitions(b) (2,444) (2,492)
Adjustments relating to discontinued operations 2 845
------ ------
Cash provided by operations 6,618 6,601
------ ------
INVESTING ACTIVITIES
Investments and acquisitions, net of cash acquired (877) (570)
Investments and acquisitions from discontinued
operations - (52)
Capital expenditures and product development
costs from continuing operations (3,024) (2,761)
Capital expenditures from discontinued operations - (126)
Investment proceeds from available-for-sale
securities 532 1,079
Investment proceeds from discontinued operations - 1,056
Other investment proceeds 2,866 1,451
------ ------
Cash provided (used) by investing activities (503) 77
------ ------
FINANCING ACTIVITIES
Borrowings 1,631 2,492
Debt repayments (4,834) (7,230)
Redemption of redeemable preferred securities
of subsidiary - (813)
Proceeds from exercise of stock options 353 372
Principal payments on capital leases (191) (178)
Other 25 (11)
------ ------
Cash used by financing activities (3,016) (5,368)
------ ------
INCREASE IN CASH AND EQUIVALENTS 3,099 1,310
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 3,040 1,730
------ ------
CASH AND EQUIVALENTS AT END OF PERIOD $6,139 $3,040
====== ======
(a) Includes net income from discontinued operations of $121 million
for the year ended December 31, 2004 and a net loss of $495
million for the year ended December 31, 2003.
(b) 2004 includes $510 million in legal reserves related to the
government investigations.
See accompanying notes.
TIME WARNER INC.
RECONCILIATION OF OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION TO OPERATING INCOME
(millions, unaudited)
Three Months Ended December 31, 2004
Operating Income
before Depreciation Operating
and Amortization Depreciation Amortization Income
------------------- ------------ ------------ --------
AOL(a) $ 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
====== ====== ====== ======
Three Months Ended December 31, 2003
Operating Income
before Depreciation Operating
and Amortization Depreciation Amortization Income
------------------- ------------ ------------ --------
AOL $ 301 $ (141) $ (50) $ 110
Cable 797 (369) (51) 377
Filmed
Entertainment 389 (23) (53) 313
Networks 602 (51) (6) 545
Publishing(c) 347 (36) (50) 261
Corporate (102) (9) - (111)
Intersegment
elimination (3) - - (3)
------ ------ ------ ------
Total $ 2,331 $ (629) $ (210) $ 1,492
====== ====== ====== ======
(a) Operating Income before Depreciation and Amortization and
Operating Income include a gain of $7 million related to the sale
of Netscape Security Solutions.
(b) Operating Income before Depreciation and Amortization and
Operating Income include $10 million in legal reserves related to
the government investigations.
(c) Operating Income before Depreciation and Amortization and
Operating Income include a $29 million loss on the sale of Time
Life.
TIME WARNER INC.
RECONCILIATION OF OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION TO OPERATING INCOME
(millions, unaudited)
Year Ended December 31, 2004
Operating Income
before Depreciation Operating
and Amortization Depreciation Amortization Income
------------------- ------------ ------------ --------
AOL(a) $ 1,772 $ (662) $ (176) $ 934
Cable 3,278 (1,438) (76) 1,764
Filmed
Entertainment 1,474 (104) (213) 1,157
Networks(b) 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
====== ====== ====== ======
Year Ended December 31, 2003
Operating Income
before Depreciation Operating
and Amortization Depreciation Amortization Income
------------------- ------------ ------------ --------
AOL $ 1,505 $ (668) $ (175) $ 662
Cable 2,992 (1,403) (58) 1,531
Filmed
Entertainment(e) 1,355 (86) (206) 1,063
Networks(b) 2,027 (192) (26) 1,809
Publishing(c) 955 (116) (175) 664
Corporate (424) (34) - (458)
Intersegment
elimination (17) - - (17)
------ ------ ------ ------
Total $ 8,393 $(2,499) $ (640) $ 5,254
====== ====== ====== ======
(a) Operating Income before Depreciation and Amortization and
Operating Income include a $10 million impairment of a building
held for sale in Virginia, a $13 million gain from asset disposals
related to the sale of AOL Japan and a $7 million gain related to
the sale of Netscape Security Solutions.
(b) Operating Income before Depreciation and Amortization and
Operating Income in 2004 include an approximate $7 million loss on
the finalization of the winter sports teams sale. Operating Income
before Depreciation and Amortization and Operating Income in 2003
include a $219 million impairment of intangible assets related to
the winter sports teams.
(c) Operating Income before Depreciation and Amortization and
Operating Income in 2004 include an $8 million gain on the sale of
a building located in Virginia. Operating Income before
Depreciation and Amortization and Operating Income in 2003
include a $99 million impairment of goodwill and other intangible
assets related to the Time Warner Book Group, and a $29 million
loss on the sale of Time Life.
(d) Operating Income before Depreciation and Amortization and
Operating Income include $510 million in legal reserves related to
the government investigations.
(e) Operating Income before Depreciation and Amortization and
Operating Income include a $43 million gain related to the sale of
consolidated cinemas in the UK.
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, 2004
Adjusted Legal Reserves
Operating Income Related to the
before Depreciation Asset Government
and Amortization Impairments Investigations
------------------- ----------- --------------
AOL(a) $ 326 $ - $ -
Cable 887 - -
Filmed Entertainment 284 - -
Networks 663 - -
Publishing 405 - -
Corporate(b) (119) - (10)
Intersegment
elimination (18) - -
------- ----- -------
Total $ 2,428 $ - $ (10)
======= ===== =======
Gains/(Losses) Operating Income
From before Depreciation
Asset Disposals and Amortization
---------------- -------------------
AOL(a) $ 7 $ 333
Cable - 887
Filmed Entertainment - 284
Networks - 663
Publishing - 405
Corporate(b) - (129)
Intersegment
elimination - (18)
----- ------------
Total $ 7 $ 2,425
===== ============
Three Months Ended December 31, 2003
Adjusted Legal Reserves
Operating Income Related to the
before Depreciation Asset Government
and Amortization Impairments Investigations
------------------- ----------- --------------
AOL $ 301 $ - $ -
Cable 797 - -
Filmed Entertainment 389 - -
Networks 602 - -
Publishing(c) 376 - -
Corporate (102) - -
Intersegment
elimination (3) - -
------- ----- -------
Total $ 2,360 $ - $ -
======= ===== =======
Gains/(Losses) Operating Income
From before Depreciation
Asset Disposals and Amortization
---------------- -------------------
AOL $ - $ 301
Cable - 797
Filmed Entertainment - 389
Networks - 602
Publishing(c) (29) 347
Corporate - (102)
Intersegment
elimination - (3)
----- ------------
Total $ (29) $ 2,331
===== ============
(a) Operating Income before Depreciation and Amortization includes a
gain of $7 million related to the sale of Netscape Security
Solutions.
(b) Operating Income before Depreciation and Amortization includes $10
million in legal reserves related to the government
investigations.
(c) Operating Income before Depreciation and Amortization includes a
$29 million loss on the sale of Time Life.
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, 2004
Adjusted Legal Reserves
Operating Income Related to the
before Depreciation Asset Government
and Amortization Impairments Investigations
------------------- ----------- --------------
AOL(a) $ 1,762 $ (10) $ -
Cable 3,278 - -
Filmed Entertainment 1,474 - -
Networks(b) 2,701 - -
Publishing(c) 1,188 - -
Corporate(d) (510) - (510)
Intersegment
elimination (22) - -
------- ----- -------
Total $ 9,871 $ (10) $ (510)
======= ===== =======
Gains/(Losses) Operating Income
From before Depreciation
Asset Disposals and Amortization
---------------- -------------------
AOL(a) $ 20 $ 1,772
Cable - 3,278
Filmed Entertainment - 1,474
Networks(b) (7) 2,694
Publishing(c) 8 1,196
Corporate(d) - (1,020)
Intersegment
elimination - (22)
----- ------------
Total $ 21 $ 9,372
===== ============
Year Ended December 31, 2003
Adjusted Legal Reserves
Operating Income Related to the
before Depreciation Asset Government
and Amortization Impairments Investigations
------------------- ----------- --------------
AOL $ 1,505 $ - $ -
Cable 2,992 - -
Filmed
Entertainment(e) 1,312 - -
Networks(b) 2,246 (219) -
Publishing(c) 1,083 (99) -
Corporate (424) - -
Intersegment
elimination (17) - -
------- ----- -------
Total $ 8,697 $(318) $ -
======= ===== =======
Gains/(Losses) Operating Income
From before Depreciation
Asset Disposals and Amortization
---------------- -------------------
AOL $ - $ 1,505
Cable - 2,992
Filmed Entertainment(e) 43 1,355
Networks(b) - 2,027
Publishing(c) (29) 955
Corporate - (424)
Intersegment
elimination - (17)
----- ------------
Total $ 14 $ 8,393
===== ============
(a) Operating Income before Depreciation and Amortization includes a
$10 million impairment of a building held for sale in Virginia, a
$13 million gain related to the sale of AOL Japan and a $7 million
gain related to the sale of Netscape Security Solutions.
(b) Operating Income before Depreciation and Amortization in 2004
includes an approximate $7 million loss on the finalization of the
winter sports teams sale. Operating Income before Depreciation and
Amortization in 2003 includes a $219 million impairment of
intangible assets related to the winter sports teams.
(c) Operating Income before Depreciation and Amortization in 2004
includes an $8 million gain on the sale of a building located in
Virginia. Operating Income before Depreciation and Amortization in
2003 includes a $99 million impairment of goodwill and other
intangible assets related to the Time Warner Book Group, and a $29
million loss on the sale of Time Life.
(d) Operating Income before Depreciation and Amortization includes
$510 million in legal reserves related to the government
investigations.
(e) Operating Income before Depreciation and Amortization includes a
$43 million gain related to the sale of consolidated cinemas in
the UK.
TIME WARNER INC.
RECONCILIATION OF CASH PROVIDED BY OPERATIONS TO FREE CASH FLOW
(millions, unaudited)
Time Warner evaluates operating performance based on several factors,
including Free Cash Flow, which is defined as cash provided by
operations less cash provided by discontinued operations, capital
expenditures and product development costs, principal payments on
capital leases, and partnership distributions, if any.
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
---- ---- ---- ----
Cash provided by operations $ 1,230 $ 1,406 $ 6,618 $ 6,601
Less discontinued operations:
Net (income) loss (6) 466 (121) 495
Other changes 13 (377) (2) (845)
------- ------ ------ ------
Cash provided by
continuing operations 1,237 1,495 6,495 6,251
Capital expenditures and
product development costs
from continuing operations (1,003) (916) (3,024) (2,761)
Principal payments on capital
leases (43) (73) (191) (178)
------- ------ ------ ------
Free Cash Flow $ 191 $ 506 $ 3,280 $ 3,312
======= ====== ====== ======
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Description of Business, Update on Status of Government Investigations, and Basis of Presentation Description of Business Time Warner Inc. ("Time Warner" or the "Company") is a leading media and entertainment company. Time Warner classifies its business interests into five business 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. . Update on Status of Government Investigations and 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 Financial Statements As announced on December 15, 2004, the Company and its subsidiary, America Online, Inc. ("AOL"), have reached a definitive agreement with 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. ") that resolves the DOJ's investigation of the Company. The Company also announced that it has proposed a settlement to the staff of the Securities and Exchange Commission ("SEC") that the staff has agreed, subject to agreement on appropriate documentation, to recommend to the SEC Commissioners. Under the terms of the settlement in connection with the investigation of the DOJ, the DOJ filed a criminal complaint against AOL for the conduct of certain employees in connection with securities fraud by PurchasePro.com, but the DOJ will defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. 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" of AOL. After two years, provided the Company fulfills its obligations under the agreement, the DOJ will dismiss dismiss v. the ruling by a judge that all or a portion (one or more of the causes of action) of the plaintiff's lawsuit is terminated (thrown out) at that point without further evidence or testimony. the criminal complaint filed against AOL. In addition, the DOJ will not prosecute To follow through; to commence and continue an action or judicial proceeding to its ultimate conclusion. To proceed against a defendant by charging that person with a crime and bringing him or her to trial. the Company or AOL for conduct relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc certain other transactions entered into by AOL or the Company from July July: see month. 1, 1999, including transactions that were the subject of the DOJ or SEC investigations. In connection with 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 may 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. as of December 31, 2004. The Company's other obligations under the settlement agreement are to (a) accept responsibility for the conduct of certain AOL employees with respect to PurchasePro.com transactions; (b) cooperate fully with the DOJ or any other federal criminal law enforcement agency Noun 1. law enforcement agency - an agency responsible for insuring obedience to the laws FBI, Federal Bureau of Investigation - a federal law enforcement agency that is the principal investigative arm of the Department of Justice regarding the transactions covered by the settlement; and (c) retain and cooperate with an independent monitor, who will review the effectiveness of AOL's internal controls, including those related to the accounting for advertising and related transactions. Under the settlement proposed to the SEC staff by the Company, Time Warner will agree, without admitting or denying the Commission's allegations, to be enjoined from future violations of certain provisions of the securities laws. Under the proposed settlement: --The Company would pay a $300 million penalty, which the SEC staff will request be used for a Fair Fund, as 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: under the Sarbanes-Oxley Act See SOX. ; --The Company would 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. ("Bertelsmann") that were improperly im·prop·er adj. 1. Not suited to circumstances or needs; unsuitable: improper shoes for a hike; improper medical treatment. 2. recognized 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. Additionally, the Company would adjust its accounting for transactions involving three other AOL customers where there were Advertising revenues recognized in the second half of 2000 and during 2001; --Consistent with its previous announcement, the Company would adjust its historical accounting for its investment in and consolidation of AOL Europe S.A. ("AOL Europe"); and --The Company would also agree to the appointment of an independent examiner, who - within 180 days after starting work - will review whether the Company's historical accounting for transactions with a limited number of 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. , principally involving online advertising revenues, was in accordance with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). Final settlement is subject to both agreement on final documentation and approval by the SEC Commissioners. In connection with the proposed settlement with the SEC, the financial results for each of the years ended December 31, 2000 through December 31, 2003 will be restated to adjust the accounting for approximately $489 million in Advertising revenues in the aggregate, including the 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). $400 million with Bertelsmann that the Company will now reflect as a reduction in the purchase price of AOL Europe in 2002, rather than as Advertising revenues during 2001 and 2002. In addition, the Company will adjust its accounting for an additional $20 million of Advertising revenues that were recognized in 2001 but should have been recognized in 2002. The impact of all of the adjustments will be to reduce the Company's consolidated Advertising revenues by a total of approximately $489 million over these periods, with corresponding reductions in Operating Income before Depreciation and Amortization, Operating Income and pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. for that same time period of $46 million, $42 million and $4 million, respectively. The difference between Operating Income before Depreciation and Amortization and Operating Income is approximately $3 million of amortization and approximately $1 million of depreciation. As noted above, the Company also is restating its results to consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. AOL Europe in 2000. Previously, the Company began consolidating AOL Europe's operations in January January: see month. 2002. The accompanying financial information reflects the impact of the adjustments that will be made in the restatement of the Company's 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 . The impact of restating the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. transactions and the consolidation of AOL Europe beginning in 2000 on the Company's reported revenues, Operating Income (Loss), Net Income (Loss), cash flow provided (used) by operations, investing activities and financing activities for the years ended December 31, 2002, 2001 and 2000 would be as follows:
Time Warner Impact of Adjusted
(as reported) Restatement Time Warner
(unaudited) (unaudited)(a) (unaudited)
------------- -------------- -----------
2002: (in millions)
Income Statement:
Revenues $37,314 $(254) $37,060
Operating Income (Loss) (b) (38,688) 1,274 (37,414)
Net Income (Loss) (b) (c) (43,449) 1,479 (41,970)
Cash Flow:
Cash Provided (Used) by
Operations $7,032 $(275) $6,757
Cash Provided (Used) by
Investing Activities (10,460) 223 (10,237)
Cash Provided by
Financing Activities 4,439 - 4,439
Total Change in Cash 1,011 (52) 959
2001:
Income Statement:
Revenues $33,507 $589 $34,096
Operating Income (Loss) 500 (892) (392)
Net Loss (c) (4,221) (926) (5,147)
Cash Flow:
Cash Provided (Used) by
Operations $5,281 $(800) $4,481
Cash Provided (Used) by
Investing Activities (5,257) 108 (5,149)
Cash Provided (Used) by
Financing Activities (1,915) 594 (1,321)
Total Change in Cash (1,891) (98) (1,989)
2000:
Income Statement:
Revenues $7,605 $515 $8,120
Operating Income (Loss) 1,766 (307) 1,459
Net Income (Loss) 1,121 (254) 867
Cash Flow:
Cash Provided (Used) by
Operations $1,951 $(226) $1,725
Cash Provided (Used) by
Investing Activities (2,316) 79 (2,237)
Cash Provided by
Financing Activities 421 297 718
Total Change in Cash 56 150 206
(a) The Company is required to consolidate AOL Europe for periods subsequent to the change in AOL Europe's governance Governance makes decisions that define expectations, grant power, or verify performance. It consists either of a separate process or of a specific part of management or leadership processes. Sometimes people set up a government to administer these processes and systems. rights in late March 2000. However, for purposes of convenience, and as permitted under the accounting rules, the Company will consolidate AOL Europe retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a to January 1, 2000 and AOL will begin to recognize 100% of AOL Europe's losses effective March 31, 2000. (b) There is a positive impact on the Operating Loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. and Net Loss in 2002 due to a lower goodwill impairment charge at the AOL segment than originally reported. Specifically, the (1) incremental losses assumed by AOL related to the consolidation of AOL Europe beginning in 2000 and (2) the treatment of consideration received on certain other transactions as a reduction of the purchase price of AOL Europe as opposed op·pose v. op·posed, op·pos·ing, op·pos·es v.tr. 1. To be in contention or conflict with: oppose the enemy force. 2. to Advertising revenues reduce the goodwill recognized in connection with the Company's purchase of Bertelsmann's interest in AOL Europe in January 2002. There is a corresponding reduction in the impairment charge recognized thereon there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that in the fourth quarter of 2002. (c) Amounts are before discontinued operations and cumulative effect of accounting change. For the year ended December 31, 2003, the results of operations reflect a reduction in the Company's consolidated revenues and Operating Income of approximately $2 million and $1 million, respectively. There was no impact on the previously reported results of operations for the first three quarters of the year ended December 31, 2004. As previously addressed, as part of the proposed settlement with the SEC, the Company has agreed to appoint To designate, select, or assign authority to a position or an office. Although sometimes used interchangeably, elect and appoint do not have the same meaning. Election refers to the selection of a public officer by the qualified voters of the community, and appointment an independent examiner, who - within 180 days after starting work - will review whether the Company's historical accounting for transactions with a limited number of counterparties, principally involving online advertising revenues, was in accordance with GAAP. Depending on the 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. Basis of Presentation 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 current-year presentation, including a reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. impacting the Company's and the Filmed Entertainment segment's operating results to reflect a change in how the Company classifies the accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the of discounts on long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. film licensing arrangements. Previously, the Company classified the accretion of discounts on long-term film licensing arrangements within Operating Income. Such accretion is now being classified as a reduction of interest expense, net. The accretion for the three months and year ended December 31, 2003 was $28 million and $110 million, respectively. Such reclassifications did not affect Net Income, Cash Provided by Operations or Free Cash Flow. Use of Operating Income before Depreciation and Amortization, Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow 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 non-cash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales, legal reserves related to the government investigations, and legal reserves that may be established in connection with the pending securities litigation (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 non-cash depreciation of tangible assets and amortization of certain intangible 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 before Depreciation and Amortization does not reflect the diminution in value of goodwill and intangible assets or gains and losses on asset sales. Management evaluates the costs of such tangible and intangible assets, the impact of related impairments, as well as asset sales through other financial measures, such as capital expenditures, investment spending and return on capital. Free Cash Flow is Cash Provided by Operations (as defined by accounting principles generally accepted in the United States) less cash provided by discontinued operations, capital expenditures and product development costs, principal payments on capital leases, and partnership distributions, if any. Free Cash Flow is considered to be 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. 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 with accounting principles generally accepted in the United States.
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2: Other Transactions and Items Affecting Comparability
Three Months Year Ended
Ended December 31, December 31,
------------------ ---------------
2004 2003 2004 2003
---- ---- ---- ----
(millions)
Items that impact
operating income:
Restructuring costs $ (52) $ (37) $ (50) $(109)
Legal reserves related
to the government
investigations (10) - (510) -
Asset impairments - - (10) (318)
Net gain (loss) on
disposal of assets 7 (29) 21 14
----- ----- ----- -----
Impact on operating income (55) (66) (549) (413)
----- ----- ----- -----
Items that impact other
income (expense), net:
Microsoft Settlement - - - 760
Investment gains 87 19 453 797
Gain on WMG option 50 - 50 -
Loss on investments, net (5) (37) (29) (204)
----- ----- ----- -----
Impact on other income, net 132 (18) 474 1,353
----- ----- ----- -----
Pre-tax impact 77 (84) (75) 940
Income tax impact (34) 35 (82) (394)
----- ----- ----- -----
After-tax impact $ 43 $ (49) $(157) $ 546
===== ===== ===== =====
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). Costs Restructuring costs consist of charges related to employee terminations and exit activities, which are expensed in accordance with accounting principles generally accepted in the United States. During the three months and year ended December 31, 2004, the Company incurred restructuring costs of $52 million and $50 million (which include a $3 million and $5 million reduction, respectively, in restructuring costs reflecting changes in estimates of previously established restructuring accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. ), respectively, at the AOL segment. During the three months ended December 31, 2003, the Company incurred restructuring costs of $37 million, comprised of $22 million at the AOL segment and $15 million at the Cable segment. During the year ended December 31, 2003, the Company incurred restructuring costs of $109 million, comprised of $52 million at the AOL segment, $21 million at the Networks segment, $15 million at the Cable segment and $21 million at the Publishing segment. These costs are included in "restructuring costs" in the accompanying consolidated statement of operations See Income statement. . Legal Reserves Related to the Government Investigations As previously discussed, during 2004, the Company (a) incurred a $210 million charge in connection with the definitive agreement with the DOJ that resolves the DOJ's investigation of the Company and (b) established a $300 million reserve in connection with the proposed settlement with the SEC, which the SEC staff will request be used for a Fair Fund, as authorized under the Sarbanes-Oxley Act. The amounts included in the Fair Fund can be used to settle any related shareholder securities litigation. The $210 million DOJ settlement amount consists of a $60 million penalty to the DOJ and the establishment of a $150 million fund that the Company may use to settle any related shareholder securities litigation. The $150 million fund is reflected as restricted cash on the accompanying consolidated balance sheet. Asset Impairments Impairment of Goodwill and Intangible Assets During the year ended December 31, 2003, the Company recorded $219 million of intangible asset impairment charges related to the winter sports teams at the Networks segment and also recorded a $99 million goodwill and intangible asset impairment charge at the Publishing segment related to the Time Warner Book Group. These impairments were recognized as a result of fair value information obtained at the time through negotiations with third parties about the potential disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of these businesses. Impairment of Property, Plant and Equipment During the year ended December 31, 2004, the Company recognized a $10 million impairment charge related to a building held for sale at the AOL segment. Gain/(loss) on disposal of assets Sale of Netscape Security Solutions During the year ended December 31, 2004, the Company recognized a $7 million gain related to the sale of Netscape Security Solutions at the AOL segment. Sale of AOL Japan During the year ended December 31, 2004, the Company recognized a $13 million gain at the AOL segment related to the sale of AOL Japan. Sale of Publishing Building During the year ended December 31, 2004, the Company recognized an $8 million gain on the sale of a building located in Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). , which was owned by the Publishing segment. Sale of Winter Sports Teams On March 31, 2004, the Company completed the sale of the Turner winter sports teams (the Atlanta Thrashers The Atlanta Thrashers are a professional ice hockey team based in Atlanta, Georgia. They are members of the Southeast Division of the Eastern Conference of the National Hockey League (NHL). Their home arena is Philips Arena. , an NHL NHL Non-Hodgkin's lymphoma, see there team, and the Atlanta Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. Hawks Hawks , Howard Winchester 1896-1977. American filmmaker whose works include His Girl Friday (1940) and The Big Sleep (1946). , an NBA NBA abbr. 1. National Basketball Association 2. National Boxing Association NBA (US) n abbr (= National Basketball Association) → Basketball-Dachverband (= team) and the entity holding the operating rights to Philips Arena For the stadium of PSV Eindhoven, see . • • , an Atlanta sports and entertainment venue venue In law, the place or county in which the events giving rise to a legal action take place and from which a jury may be drawn to try the case. Venue statutes usually specify that a trial must take place in the district that has jurisdiction over the matter. , to Atlanta Spirit LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control ("Atlanta Spirit"). In addition to the $219 million of impairment charges recognized in 2003, the Company recorded an approximate $7 million loss on the closing of the sale in the first quarter of 2004. As of December 31, 2004, Turner owns an approximate 10% interest in Atlanta Spirit and accounts for its interest under the equity method of accounting. Sale of Time Life During the year ended December 31, 2003, the Company recognized a loss of $29 million related to the sale of Time Life. Sale of Interest in UK Cinemas During the second quarter of 2003, the Company recognized a $43 million gain on the sale of its interest in UK cinemas, which had previously been consolidated by the Filmed Entertainment segment. Microsoft Settlement During the second quarter of 2003, Microsoft and Time Warner entered into an agreement to settle the then-pending litigation between Microsoft and Netscape for a cash payment of $750 million and agreed to collaborate on long-term digital media initiatives that will accelerate the adoption of digital content (the "Microsoft Settlement"). As part of the settlement, the Company recognized a gain of approximately $760 million. Investment Gains During the three months ended December 31, 2004, the Company recognized $87 million of investment related gains, including a $44 million gain related to the sale of the Company's investment in Gateway. For the year ended December 31, 2004, the Company recognized $453 million of investment related gains, including a $44 million gain from the sale of the Company's investment in Gateway, a $188 million gain related to the sale of a portion of the Company's interest in Google and a $113 million gain related to the sale of the Company's interest in VIVA and VIVA Plus. During the three months ended December 31, 2003, the Company recognized $19 million of investment related gains. For the year ended December 31, 2003, the Company recognized $797 million of investment related gains, including a $513 million gain from the sale of the Company's interest in Comedy Central, a $52 million gain from the sale of the Company's interest in chinadotcom, a $50 million gain from the sale of the Company's interest in Hughes Electronics Corp. and gains of $66 million on the sale of the Company's equity interest in international cinemas. Further, in relation to Google, in May 2004, America Online exercised a warrant for approximately $22 million and received approximately 7.4 million shares of Series D Preferred Stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. of Google Inc. Each of these shares converted automatically into shares of Google's Class B Common Stock immediately prior to the closing of Google's initial public offering on August 24, 2004. In connection with this offering, America Online converted 2,355,559 shares of its Google Class B Common Stock into an equal number of shares of Google's Class A Common Stock. Such Class A shares were sold in the offering for $195 million, net of the underwriters' discounts and commissions, resulting in a gain of approximately $188 million. Following this transaction, America Online holds 5,081,893 shares of Google's Class B Common Stock. Transfers of these shares are subject to applicable securities laws requiring that sales be made either pursuant to a registration statement or under exemptions from registration. The Company does not consider its remaining interest in Google to be a strategic investment. As of December 31, 2004, the shares are recorded on the Company's consolidated balance sheet (classified as available-for-sale securities) at their fair value of approximately $980 million. There is a corresponding unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. of approximately $579 million, net of deferred taxes of approximately $386 million, reflected in shareholders equity. The fair value of the investment is calculated based on Google's stock price ($192.79 at December 31, 2004) times the number of Google shares owned by the Company. Gain on WMG WMG Warner Music Group WMG Wireless Messaging Gateway WMG Williams Media Group WMG Where's My Glasses? WMG Woah My God WMG Wireless Marketing Group WMG Wisconsin Musical Groups WMG Windows Metafile Graphics WMG Wireless Media Gateway Option For the year ended December 31, 2004, the Company recorded a $50 million fair value adjustment related to the Company's option in WMG. See Note 4. Loss on Investments, net For the three months and year ended December 31, 2004, non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. to reflect other-than-temporary declines in the Company's investments were $5 million and $29 million, respectively. This amount reflects $3 million and $15 million, respectively, to reduce the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of certain investments that experienced other-than-temporary declines in market value and $2 million and $14 million of losses, respectively, related to market fluctuations in equity derivative In finance, an equity derivative is a class of financial instruments whose value is at least partly derived from one or more underlying equity securities. Market participants trade equity derivatives in order to transfer or transform certain risks associated with the instruments. For the three months and year ended December 31, 2003, non-cash charges to reflect other-than-temporary declines in the Company's investments were $37 million and $204 million, respectively. These amounts were comprised of $29 million and $212 million, respectively, to reduce the carrying value of certain investments that experienced other-than-temporary declines in market value offset by $8 million of losses and $8 million of income, respectively, to reflect market fluctuations in equity derivative instruments. Included in the second quarter 2003 charge was a 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. of $77 million of the Company's equity interest in AOL Japan and a $71 million writedown of the Company's equity interest in NTV-Germany. Note 3: Intersegment Transactions In the normal course of business, the Time Warner segments enter into transactions with one another. The most common types of intercompany transactions Intercompany transaction Transaction carried out between two units of the same corporation. include: --The Filmed Entertainment segment generating Content revenue by licensing television and theatrical programming to the Networks segment; --The Networks segment generating Subscription revenue by selling cable network programming to the Cable segment; --The Cable segment recognizing Subscription revenue by offering the AOL service to its subscribers; --The AOL, Cable, Networks and Publishing segments generating Advertising revenue by cross-promoting the products and services of all Time Warner segments; and --The AOL segment generating Other revenue by providing the Cable segment's customers access to the AOL Transit Data Network (ATDN ATDN AOL Transit Data Network ATDN Any Time Day or Night ATDN Advanced Technology Demonstration Network (Darpa) ATDN Amazon Tree Diversity Network ) for high-speed access to the 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 . 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) 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:
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Three Months Ended Year Ended
December 31, December 31,
------------------------------------------
2004 2003 2004 2003
---- ---- ---- ----
(millions)
Intersegment Revenues
AOL $ 14 $ 18 $ 59 $ 102
Cable 17 15 54 69
Filmed Entertainment 264 222 757 816
Networks 159 158 602 605
Publishing 27 21 87 76
----- ----- ----- ------
Total intersegment
revenues $481 $434 $1,559 $1,668
===== ===== ====== ======
Note 4: Sale of Music Segment With the closing of the Warner Music Group ("WMG") recorded music recorded music n → música grabada and music publishing The contractual relationship between a songwriter or music composer and a music publisher, whereby the writer assigns part or all of his or her music copyrights to the publisher in exchange for the publisher's commercial exploitation of the music. transaction in the first quarter of 2004, the Company has disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of its Music operations. Accordingly, the Company has presented the results of operations and financial condition of the Music segment as discontinued operations for all periods presented. Financial data of the Music operations, included in discontinued operations for the three months and year ended December 31, 2004 and 2003, is as follows:
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Three Months Ended Year Ended
December 31, December 31,
------------------------------------------
2004 2003 2004 2003
---- ---- ---- ----
(millions)
Total revenues $ - $1,813 $780 $4,312
Pre-tax income (loss) 7 (515) (2) (567)
Income tax (expense)
benefit (1) 49 123 72
Net income (loss) 6 (466) 121 (495)
The 2004 income/charges recorded relate primarily to adjustments to the initial estimates of the assets sold to, and liabilities assumed by, the acquirors in such transactions and to the resolution of various tax matters surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. the music business dispositions. As of December 31, 2004, there are $89 million of liabilities associated with the former Music operations. The liabilities are principally related to 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 and pension obligations to former employees of the Music segment, which were retained by Time Warner. In connection with the sale of WMG, the Company received an option to reacquire a minority interest in WMG. During 2004, the Company recognized a $50 million gain related to an increase in fair value of this option. Note 5: Cable Capital Expenditures and Subscriber Statistics Capital Expenditures The Cable segment's capital expenditures 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 are comprised of the following categories:
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Three Months Ended Year Ended
December 31, December 31,
------------------------------------------
2004 2003 2004 2003
---- ---- ---- ----
(millions)
Customer premise
equipment $185 $183 $719 $ 715
Scaleable
infrastructure 95 71 205 173
Line extensions 73 69 239 214
Upgrade/rebuild 47 45 139 175
Support capital 185 137 410 360
----- ----- ----- ------
Total capital
expenditures $585 $505 $1,712 $1,637
===== ===== ====== ======
Cable Subscriber Statistics At the Time Warner Cable segment, total customer relationships, representing the number of customers that receive at least one level of service, increased by 1.4% to 11.557 million as of December 31, 2004 compared to 11.394 million as of December 31, 2003. Revenue generating units, representing the total of all analog video The original video recording method that stores continuous waves of red, green and blue intensities. In analog video, the number of rows is fixed. There are no real columns, and the maximum detail is determined by the frequency response of the analog system. , digital video, high-speed data and telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. customers, increased by 7.3% to 19.996 million (including 2.926 million subscribers of unconsolidated investees, which are managed by the Company) as of December 31, 2004 compared to 18.634 million (including 2.725 million subscribers of unconsolidated investees, which are managed by the Company) as of December 31, 2003. The Company's subscriber amounts include all subscribers at both consolidated entities and investees accounted for under the equity method of accounting that are managed by the Company. Note 6: Internet 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. During the fourth quarter of 2004, AOL reversed a liability of approximately $56 million for certain state sales taxes related to the November November: see month. 2003 expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of the federal moratorium on Internet sales taxes. This liability had previously been 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. during the period from November 2003 through September September: see month. 30, 2004 ($47 million of which was accrued for previously in 2004). In the fourth quarter of 2004, the US government enacted the Internet Tax Nondiscrimination Act that retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin reinstated the federal moratorium on Internet sales taxes to November 2003 and extended the federal moratorium on Internet sales taxes through 2007. As a result of the retroactive nature of the legislation, AOL was relieved re·lieve tr.v. re·lieved, re·liev·ing, re·lieves 1. To cause a lessening or alleviation of: relieved all his symptoms; relieved the tension. 2. of the sales tax exposures for which it had previously accrued. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion