Time Warner Inc. has announced the financial results for third quarter 2009 ended Sepbember 30 , 2009.In the quarter, Revenues declined 6% from the third quarter of 2008 to $7.1 billion. Lower revenues at the AOL, Publishing and Filmed Entertainment segments more than offset growth at the Networks segment. Adjusted Operating Income before Depreciation and Amortization (“Adjusted OIBDA”) was down 9% to $1.8 billion, as declines at the AOL and Publishing segments more than offset growth at the Networks and Filmed Entertainment segments. Operating Income decreased 10% to $1.4 billion.
Chairman and Chief Executive Officer Jeff Bewkes said: “Time Warner is firmly on track to post solid results this year in spite of the tough economic environment. Driven by the better-than-expected performance at our Content Group this quarter, we’re raising our 2009 business outlook. We still expect to spin off AOL by the end of the year, and we’re making great progress on our other longer-term strategic priorities. At the same time, we’re investing even more in our businesses and increasing our direct returns
to stockholders this year, while significantly strengthening our balance sheet. I’m confident that the new content-focused Time Warner will be well positioned to deliver steady and attractive stockholder returns in 2010 and beyond.”
For the Content Group (which consists of the Networks, Filmed Entertainment, Publishing and Corporate segments), Revenues were down 3%, Adjusted OIBDA decreased 1%, and Operating Income declined 2%. For the first nine months of 2009, Cash Provided by Operations from Continuing Operations was $3.5 billion, and Free Cash Flow totaled $3.0 billion (reflecting a 61% conversion rate of Adjusted OIBDA). As of September 30, 2009, Net Debt was $10.4 billion, down $10.3 billion from $20.7 billion at the end of 2008, due primarily to the $9.3 billion special cash dividend received from Time Warner Cable Inc. on March 12, 2009, in connection with its separation from the Company, as well as the generation of Free
Cash Flow.
Adjusted Diluted Income per Common Share from Continuing Operations (“Adjusted EPS”) was $0.61 for the three months ended September 30, 2009, compared to $0.65 in last year’s third quarter. Diluted Income per Common Share from Continuing Operations was $0.55 for the three months ended September 30, 2009, compared to $0.63 in last year’s third quarter.
Turner Broadcasting & HBO revenues rose 5% ($143 million) to $2.9 billion, with 9% growth ($163 million) in Subscription revenues, partially offset by a 12% decline ($27 million) in Content revenues and a 1% decrease ($4 million) in Advertising revenues. Subscription revenues benefited primarily from the impact of the consolidation of HBO Latin America Group (“HBO LAG”), as well as higher subscription rates at both Turner and HBO, partly offset by the unfavorable impact of foreign exchange rates at Turner. Content revenues decreased due
to lower ancillary sales of HBO’s original programming, offset in part by the effect of lower than anticipated home video returns of approximately $25 million. Advertising revenues reflected a decline at Turner’s news networks and the unfavorable impact of foreign exchange rates, partially offset by an increase at domestic entertainment networks.
Adjusted OIBDA increased 9% ($88 million) to $1.1 billion, driven by higher revenues and the consolidation of HBO LAG, as well as lower marketing and newsgathering costs. Programming costs rose 10%, due to the impact of the consolidation of HBO LAG and higher original programming expenses at Turner.
Operating Income grew 3% ($29 million) to $938 million, due mostly to higher Adjusted OIBDA, partly offset by a $52 million noncash impairment of intangible assets related to Turner’s interest in a general entertainment network in India and higher depreciation ($5 million) and amortization ($5 million) expenses.
Revenues declined 4% ($101 million) to $2.8 billion, due primarily to lower revenues from home video and interactive games, and the unfavorable impact of foreign exchange rates. Theatrical film revenues from third-quarter 2009 releases, such as Harry Potter and the Half-Blood Prince and The Final Destination, as well as carryover from The Hangover, were slightly lower than in the prior year quarter, which benefited from the success of The Dark Knight. OIBDA rose 1% ($4 million) to $385 million, as the lower revenues were more than offset by overhead savings, lower print and advertising costs and a reduction in manufacturing and related costs. Operating Income increased 6% ($16 million) to $291 million, due mainly to lower amortization expenses ($13 million).
Publishing revenues decreased 18% ($204 million) to $914 million, due to declines of 22% ($129 million) in Advertising revenues, 13% ($49 million) in Subscription revenues and 24% ($32 million) in Other revenues. The decline in Advertising revenues reflected mainly lower print magazine revenues. Subscription revenues decreased due to lower magazine subscription and newsstand sales, as well as the unfavorable impact of foreign exchange rates at IPC. The decline in Other revenues resulted from decreases at the non-magazine
businesses, including Southern Living At Home, which was sold during the third quarter of 2009. Adjusted OIBDA declined 42% ($102 million) to $139 million, due mainly to the decrease in revenues and higher pension expense, partly offset by lower overhead costs, including cost savings related to the reorganization in the fourth quarter of 2008. The current and prior year quarters included restructuring charges of $12 million and $1 million, respectively. Operating Income decreased 40% ($65 million) to $97 million, resulting primarily from the decline in Adjusted OIBDA, partly offset by the effect of a $30 million noncash asset impairment incurred in the third quarter of 2008 related to a sub-lease with a tenant that filed for bankruptcy.
AOL revenues were down 23% ($235 million) to $777 million, resulting from a 29% decline ($138 million) in Subscription revenues due to continued subscriber losses and an 18% decrease ($92 million) in Advertising revenues. The decline in Advertising revenues was due primarily to lower paid-search and display advertising on AOL Media, reduced sales of advertising on third-party Internet sites and the unfavorable impact of foreign exchange rates.
Adjusted OIBDA declined 40% ($159 million) to $239 million, due primarily to lower revenues, partially offset by lower traffic acquisition costs and reduced overhead, network and other expenses. The current and prior year quarters also included net restructuring charges of $10 million and $2 million, respectively. Operating Income decreased 50% ($134 million) to $134 million, due to the decline in Adjusted OIBDA, partly offset by lower amortization ($11 million) and depreciation ($10 million) expenses.