Media and entertainment giant Time Warner Inc. (TWX) Wednesday posted a lower profit for the third quarter, reflecting weak revenues at the AOL, Publishing and Filmed Entertainment segments that more than offset growth at the Networks segment. Further, the company hiked its full-year earnings forecast, citing a better-than-expected performance at its Content Group.
Q3 Results
The New York-based company's third-quarter net income attributable to Time Warner Inc. shareholders was $661 million or $0.55 per share, compared to $1.07 billion or $0.89 per share in the year-ago quarter.
Income from continuing operations attributable to Time Warner Inc. shareholders totaled $662 million or $0.55 per share, down from $761 million or $0.63 per share in the same quarter of last year.
Adjusted income from continuing operations declined to $724 million from $784 million in the prior-year quarter. Adjusted per share earnings was $0.61, down from $0.65 earned in the comparable quarter of last year.
On average, 21 analysts polled by Thomson Reuters expected the company to post earnings of $0.53 per share. Analysts' estimates typically exclude special items.
Total revenues for the latest quarter dropped 6% to $7.14 billion from the previous year's revenue of $7.58 billion. Seventeen Wall Street analysts had a consensus revenue estimate of $7.08 billion for the quarter.
Lower revenues at the AOL, Publishing and Filmed Entertainment segments more than offset growth at the Networks segment. For the Content Group, which consists of the Networks, Filmed Entertainment, Publishing and Corporate segments, revenues were down 3%, and operating income declined 2%.
Jeff Bewkes, Chairman and Chief Executive Officer of Time Warner, 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."
Further, the company said it still expects to spin off AOL by the end of the year, and invest more in its businesses and increase its direct returns to stockholders this year, while significantly strengthening the company's balance sheet.
Networks (Turner Broadcasting & HBO)
Revenues at the company's Networks' segment advanced to $2.87 billion from $2.73 billion a year ago, with 9% growth in Subscription revenues, partially offset by a 12% decline in Content revenues and a 1% decrease in Advertising revenues. Operating income grew 3% to $938 million from $909 million last year, largely driven by higher adjusted OIBDA, partly offset by a $52 million non-cash impairment of intangible assets related to Turner's interest in a general entertainment network in India and higher depreciation and amortization expenses.
Filmed Entertainment
The Filmed Entertainment division witnessed a decline of 4% in revenues that totaled $2.78 billion, compared to $2.88 billion last year, reflecting 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. Operating income advanced 6% to $291 million from $275 million a year earlier, due primarily to lower amortization expenses.
Publishing
The company's Publishing division generated quarterly revenues of $914 million, a decline of 18%, compared to $1.12 billion in the year-ago period, hampered by a 22% drop in advertising revenues, 13% decline in Subscription revenues and 24% downturn in Other revenues. Operating income fell 40% to $97 million from $162 million posted last year, largely due to the decline in Adjusted OIBDA, partly offset by the effect of a $30 million non-cash asset impairment incurred in the third quarter of 2008 related to a sub-lease with a tenant that filed for bankruptcy.
AOL
Second-quarter revenues at AOL unit totaled $777 million, down 23% from the previous year's revenue of $1.01 billion, resulting from a 29% decline in Subscription revenues, due to continued subscriber losses and an 18% decrease in Advertising revenues, reflecting 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. Operating income plunged 50% to $134 million from $268 million last year, due to the decline in Adjusted OIBDA, partly offset by lower amortization and depreciation expenses.
Year-To-Date Highlights
For the nine-month period, the company reported net income attributable to Time Warner Inc. shareholders of $1.84 billion or $1.53 per share, compared to $2.63 billion or $2.19 per share in the prior-year period.
Income from continuing operations attributable to Time Warner Inc. shareholders declined to $1.74 billion or $1.45 per share from $1.87 billion or $1.56 per share reported a year ago.
Adjusted income from continuing operations declined to $1.81 billion from $1.93 billion in the nine months ended September 30, 2008. Adjusted earnings per share dropped to $1.51 from $1.60 in the year-earlier quarter.
Total revenues decreased to $20.9 billion from $22.5 billion reported in the comparable period of the previous year.
FY09 Forecast
In a separate communique, Time Warner said it currently projects 2009 adjusted earnings per share from continuing operations to be at least $2.05 per share, compared to adjusted per share earnings of $1.98 in 2008. This outlook now includes up to $100 million in restructuring charges at Time Warner's Publishing segment, which the company anticipates incurring in the fourth quarter of 2009. Analysts are looking for earnings of $2.03 per share for the full year. Earlier, the company expected full-year adjusted earnings per share from continuing operations to be around flat.
In addition, the company said it is providing a full-year outlook for its Content Group, hoping that AOL separation is completed in December 2009. Content Group comprises Networks, Filmed Entertainment, Publishing and Corporate segments. The company projects 2009 full-year Content Group adjusted earnings to be at least $1.75, versus $1.42 in 2008. This outlook includes the expected restructuring charges in the Publishing segment.
Peer Review
Among Time Warner's rivals, Viacom Inc. (VIA, VIA-B) posted higher third-quarter net income of $443 million or $0.73 per share, compared to $385 million or $0.62 per share in the year-ago quarter, predominantly helped by strong sales of Medof Transformers and GI Joe, and revenues from its Media Networks. Revenues dropped 3% to $3.32 billion from $3.41 billion in the previous year, primarily reflecting lower home entertainment and advertising sales, which more than offset increases in affiliate sales and theatrical revenues.
Another peer, Walt Disney Co. (DIS) is slated to release its quarterly results on November 12, with analysts forecasting earnings of $0.40 per share on revenues of $9.26 billion.
Stock Quotes
Time Warner shares, which have been trading between $17.81 and $33.66 in the past 52 weeks, closed Tuesday's trading session at $30.16.
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